Optimal Strategies for Automated Traders in a Producer-Consumer Futures Market

Laib, Fodil and Radjef, MS (2008): Optimal Strategies for Automated Traders in a Producer-Consumer Futures Market.

Abstract

The aim of this work is to show how automated traders can operate a futures market. First, we established some hypothesises on the properties of the ’correct’ price pattern which translates accurately the underlying moves in the supply/demand balance and the nominal price, then mathematical measures were derived allowing to estimate the efficiency of a given trading strategy. As a starting step, we applied our approach to a simplified market setup where only two automated traders, a producer and a consumer, can trade. They receive a stream of forecasts on supply and demand levels and they should react instantaneously by adjusting these forecasts, then issuing sale and buy orders. Later, we suggested a parameterized trading strategy for the two automatons. Finally, we obtained by simulation the optimal parameters of this strategy in some particular cases.

• Item Type: MPRA Paper
• Language: English
• Keywords: Automated traders; optimal strategies; agent based
• Subjects: C - Mathematical and Quantitative Methods > C0 - General > C02 - Mathematical Methods; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D40 - General; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C73 - Stochastic and Dynamic Games ; Evolutionary Games ; Repeated Games

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