Wednesday, May 27, 2009

[mbhxjozo] Finance game

Create a game such that extremely complicated strategies do well (at least in the short run), and the game's overall behavior is chaotic in the face of such strategies.

We wish to mimic our finance system, with its complicated strategies in for example hedge funds and algorithmic trading and overall highly volatile behavior with booms and busts. What are the essential features of the finance system that make it behave the way it does?

Do the rules of the game necessarily have to be complicated? Wolfram's thesis is that you can get complicated behavior out of simple systems. But perhaps he is wrong in this case and the complexity of the financial markets, especially in how the value of something (usually compared to something else) reflects the complexity of the world it is embedded in.

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