Sunday, 27 January 2013

Who are market participants?

I'm about to start reading a book which looks interesting and wanted to give my thoughts on the subject before I start reading it.  The book is an investigation into how certain financial markets behave, form the point of view of modelling some fraction of the agents involved.  The book is called 'Predatory Trading and crowded exits' and came out in 2010.  I don't plan to read this book fully in a hurry, so if you're looking for a pithy review, this isn't it.

The book itself seems to be a summary of Clunie's PhD work which appears to have been an investigation into the effects of short selling constraints.

But for me the real question is the broader one, about what is a good model of the set of market participants?  

As I've been doing with my a man walks into a bar theme on interest rates, I'll try to work out in principle all of the ways that  it would be useful to approach the subject of modelling market participants but describing an increasingly involved reference story.   This is clearly at heart mathematically an issue of game theory, but I don't know enough about it to properly relate it to game theory.