Bergische Universität Wuppertal
Fachbereich Mathematik und Naturwissenschaften
Angewandte Mathematik - Numerische Analysis


Agent-Based Modelling in Financial Markets

International Internship Thesis



In this thesis we want to investigate the Kim-Markowitz microscopic multi-agent model of financial markets in order to explore relationships between the share of agents pursuing portfolio insurance strategies and the volatility of the market.
An agent based model is implemented using the language Netlogo, including the two types of investor agents 'rebalancers' and 'portfolio insurer'. While the rebalancer try to keep one half of their wealth in cash and invest the remaining half in stocks (thus stabilizing the market), the portfolio insurers follow the classical CPPI strategy proposed by Black and Jones, i.e. they try to keep the risky part of the assets in a constant proportion to the so-called 'cushion'. These insurers have a destabilizing effect on the market.
With the obtained simple agent based model we can simulate stock market crashes and discuss stabilizing effects of political restrictions of insurer's trading behaviour.


agent based model, multi-agent dynamics, constant proportion portfolio insurance (CPPI), Kim-Markowitz model


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  2. S. Alfarano, T. Lux and F. Wagner, Time variation of higher moments in financial markets with heterogeneous agents: an analytical approach, J. Econ. Dyn. Control 32 (2008), 101-136.
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  10. G. Iori, A microsimulation of traders activity in the stock market: the role of heterogeneity, agents' interactions and trade frictions, J. Econ. Behav. Organ. 49 (2002), 269-285.
  11. T. Kaizoji, Speculative bubbles and crashes in stock markets: an interacting-agent model of speculative activity, Physica A 287 (2000), 493-506.
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  21. M. Youssefmir and A. Huberman, Clustered volatility in multiagent dynamics, J. Econ. Behav. Organ. 32 (1997), 101-118.


  1. Ascape
  2. Flame
  3. Mason
  4. NetLogo
  5. Repast
  6. SeSAm
  7. Swarm

University of Wuppertal
Faculty of Mathematics and Natural Sciences
Department of Mathematics
Applied Mathematics & Numerical Analysis Group

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