Research On Simulation Experience Of Artificial Stock Market Based On Market Making Mechanism

Market making mechanism is widely used in western countries.Nowadays, Chinese scholars pay close attentions to it and plan to introduce itin China.With the development of experimental Finance and behavioral Financeand computerscience, based on agent modeling method is applied into finance field moreand more.The research has promoted application of experience finance theory,meanwhile provided a good experimental platform to developmentoffinancial market microstructure theory, and has been meaningful to thedevelopment of socialeconomy and scienceandtechnology. The researchmentality and research technique can be fully applied to other finance model.Firstly, the cause of bid and ask spread, informationasymmetry andinventory risk of market maker is considered in the paper, based onfinancial market microstructure theory. what’s more, the information model andinventory model is combined in the paper, forming a totally new marketmaker model.Then, various agents in the market are simulated by agent modelingtechnology,of which market maker agent can learn from real-time experienceand can change strategies, achieving multiple objectives.Furthermore, by computer simulation experience, artificial stock marketof market making mechanism can be researched again and again. Adjustingfactors of market environment and market maker’s learning framework canbe used into financial experience.It has presented the relationship between market maker’s inventory costand trading volume and has proved that there is always a best inventory levelin market maker’s heart.Finally, this paper has analyzed the parts of the formation of bid and askprice spread’s ratio by building price spread model. It is also demonstrated that there is some relevance between the parts of bid and ask price spread andtrading volume and between inventory and price spread. All the work is inorder to reach the better inventory and price spread situation.