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Apr/09/2009
Shortsale Constraint Simulated

Not much has changed with the implementation of this constraint (except that it requires a lot more computing time.) I have also included numerous participants without any noteworthy new observations.

For the upcoming simulations I will try out continuous* time and several assets. A continuous time will not only make things more realistic, but also easier to simulate. Let me first refine the most important building blocks of the market; the price and the believed return.



* The underlying path will still use a coin-flipping approach between two points in time. The difference is that the time step are infinitely small, infinitesimal, which means that from one point in time to another, the expected change is normal distributed. This removes the zigzag pattern of the underlying economy and adds a bit of realism. The actual times of trading must be done at discrete points in time due to the limitations of computing, but with small time steps this is not a practical problem. And I could even have randomized the time between two points in time and enabled this to be as realistic as the real thing.

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