Abstract:  Based on Santa Fe Institute’s Artificial Stock Market where independent agents can sell and trade stock on a common market, we implemented a market where the agents can trade options based on the underlying stock being traded.  One of our goals is to understand how the agents and the stock behave by adding an extra layer of complexity to the artificial stock market model.  In the real world, options trading offer higher margins than investing on the underlying stock for sophisticated traders that understand changes in the market volatility.  In our model, the agent traders start with the same base knowledge of the market and we claim that only some of the agents will evolve to a good option trading strategy and consequently they will obtain higher margins than the remaining agents.

By Guilherme Hoefel

This is part of a CS 473 project presented by Guilherme Hoefel and Jordan Erenrich in the Fall of 2001