Entropy 2013, 15(2), 700-720; doi:10.3390/e15020700
Article

Study on the Stability of an Artificial Stock Option Market Based on Bidirectional Conduction

School of Economics and Management, Beijing University of Aeronautics & Astronautics, No. 37 Xueyuan Road, Haidian District, Beijing 100191, China
* Author to whom correspondence should be addressed.
Received: 29 November 2012; in revised form: 8 February 2013 / Accepted: 18 February 2013 / Published: 22 February 2013
(This article belongs to the Special Issue Social Networks and Information Diffusion)
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Abstract: Although stock option markets have grown dramatically over the past several decades, the relation between an option and its underlying asset, especially bidirectional conduction, is not particularly clear. So far, there have been many debates about this topic. We try to investigate this problem from a novel angle: an artificial stock market including a stock option is constructed in this paper. The model includes two parts, one is a stock trade module based on the Santa Fe Institute Artificial Stock Market (SFI-ASM), and the other is an option trade module. In the latter module, three types of option traders are employed. The results show that the model is effective, and experiments illustrate that option markets have a remarkable effect on stock markets. Furthermore, by appending options, the model replicates some stylized properties, such as volatility clustering and GARCH effect, which can be observed in real financial markets.
Keywords: artificial financial market; bidirectional conduction; stability; information diffusion; option

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MDPI and ACS Style

Yang, H.-J.; Sun, G.-P. Study on the Stability of an Artificial Stock Option Market Based on Bidirectional Conduction. Entropy 2013, 15, 700-720.

AMA Style

Yang H-J, Sun G-P. Study on the Stability of an Artificial Stock Option Market Based on Bidirectional Conduction. Entropy. 2013; 15(2):700-720.

Chicago/Turabian Style

Yang, Hai-Jun; Sun, Gui-Ping. 2013. "Study on the Stability of an Artificial Stock Option Market Based on Bidirectional Conduction." Entropy 15, no. 2: 700-720.

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