An Analysis of Extreme Price Shocks and Illiquidity among Systematic Trend Followers

• Main Authors: LEE, Wing Bernard, CHENG, Shih-Fen, KOH, Annie
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2010
• Subjects: Extreme Price Shocks; Market Liquidity; Systematic Trend Followers; Speculative Activities; Agent-Based Computational Economics; Commodity Trading Advisors; Financial Crisis; Finance and Financial Management; Portfolio and Security Analysis
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/1870; https://ink.library.smu.edu.sg/context/lkcsb_research/article/2869/viewcontent/KohA2010ChenSFExtremePrice.pdf
• Institution: Singapore Management University

We construct an agent-based model to study the interplay between extreme price shocks and illiquidity in the presence of systematic traders known as trend followers. The agent-based approach is particularly attractive in modeling commodity markets because the approach allows for the explicit modelin...