Market response to external events and interventions in spherical minority games

TL;DR

This paper analytically studies how large spherical Minority Games respond to external market interventions, revealing significant differences in market dynamics and volatility depending on the nature of the interventions.

Contribution

It introduces a spherical formulation of Minority Games that allows explicit analytical solutions for market response to external events, unlike traditional non-spherical models.

Findings

Analytical expressions for market response to external interventions.

Differences in transition lines between stationary and oscillating interventions.

Variations in market volatility based on intervention type.

Abstract

We solve the dynamics of large spherical Minority Games (MG) in the presence of non-negligible time dependent external contributions to the overall market bid. The latter represent the actions of market regulators, or other major natural or political events that impact on the market. In contrast to non-spherical MGs, the spherical formulation allows one to derive closed dynamical order parameter equations in explicit form and work out the market's response to such events fully analytically. We focus on a comparison between the response to stationary versus oscillating market interventions, and reveal profound and partially unexpected differences in terms of transition lines and the volatility.