This article presents a high-frequency agent-based simulator for financial markets that accurately replicates the 2010 Flash Crash and mini crash events.
The model incorporates realistic trader behaviors and allows examining how different factors generate sudden price collapses. Among the variables analyzed are trading frequency, inventory limits, execution latency, market depth, and order cancellation speed, elements that determine the severity and duration of the drops.
A key contribution of the study is the introduction of the Spiking Trader agent, designed to trigger sudden spikes in activity that lead to mini crashes. This agent mimics burst patterns in order submission and withdrawal, expanding the simulator's ability to reproduce microevents that do not emerge in traditional models.
By using an agent-based approach, the simulator allows observing nonlinear interactions among market participants, including market makers, high-frequency traders, and large institutional investors. This facilitates identifying shock propagation mechanisms and evaluating policies aimed at mitigating systemic risks.
The results show that increases in trader frequency and stricter inventory limits raise the probability and depth of collapses. Likewise, the combination of high latency with low liquidity multiplies the impact of unexpected order events, while measures such as speed limits or circuit breaker rules reduce intensity but do not completely eliminate mini crashes.
This simulator is a useful tool for both regulators and algorithm developers, as it allows testing scenarios, testing safeguards, and designing resilience mechanisms before implementing them in real markets.
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Our team can adapt the simulator to specific needs, integrate custom AI agents, and offer scalable cloud solutions for real-time simulation, algorithm auditing, and visualization tools with power bi. We also offer AI consulting for companies, deployment of AI agents, and cybersecurity strategies to protect testing and production environments.
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If you wish to assess market risks, test trading algorithms, or develop custom solutions based on this model, Q2BSTUDIO can help design, implement, and secure simulation and analysis projects with cutting-edge technology.
