2381/29001 Marc De Kamps Marc De Kamps Daniel Ladley Daniel Ladley Aistis Simaitis Aistis Simaitis Heterogeneous beliefs in over-the-counter markets University of Leicester 2014 Social Sciences Economics Business & Economics ECONOMICS Over-the-counter Boundedly rationality Stability Network Heterogeneous agent model ASSET PRICE DYNAMICS COMPLEX NETWORKS MODEL CONTAGION PERCOLATION INFORMATION BEHAVIOR TRADERS AGENTS RULES 2014-07-28 12:56:47 Journal contribution https://figshare.le.ac.uk/articles/journal_contribution/Heterogeneous_beliefs_in_over-the-counter_markets/10157048 The behavior and stability of over-the-counter markets is of central concern to regulators. Little is known, however, about how the structure of these markets determine their properties. In this paper we consider an over-the-counter market populated by boundedly rational heterogeneous traders in which the structure is represented by a network. Stability is found to decrease as the market becomes less well connected, however, the configuration of connections has a significant effect. The presence of hubs, such as those found in scale free networks increases stability and decreases volatility whilst small-world short-cut links have the opposite effect. Volatility in the fundamental value increases market volatility, however, volatility in the riskless asset returns has an ambiguous effect.