We discuss a weighted estimation of correlation and covariance matrices from historical financial data. To this end, we introduce a weighting scheme that accounts for the similarity of previous market conditions to the present situation. The resulting estimators are less biased and show lower...

An agent-based model for financial markets has to incorporate two aspects: decision making and price formation. We introduce a simple decision model and consider its implications in two different pricing schemes. First, we study its parameter dependence within a supply–demand balance setting....