Related papers: The thermodynamic approach to market
In line with the recent research and debates about econophysics and financial economics, this article discusses on usual misunderstandings between the two disciplines in terms of modelling and basic hypotheses. In the literature devoted to…
The application of principles of thermodynamics and statistical mechanics to economic systems is considered in a broad historical perspective, extending from prehistoric times to the present day. The hypothesis of maximum entropy production…
Originally, the Carnot cycle is a theoretical thermodynamic cycle that provides an upper limit on the efficiency that any classical thermodynamic engine can achieve during the conversion of heat into work, or conversely, the efficiency of a…
This mathematical essay brings together ideas from Economics, Geobiodynamics and Thermodynamics. Its purpose is to obtain real models of complex evolutionary systems. More specifically, the essay defines Roegenian Economy and links…
In this editorial guide for the special issue on econophysics, we give a unique review of this young but quickly growing discipline. A suggestive taxonomy of the development is proposed by making a distinction between classical econophysics…
Episodes of market crashes have fascinated economists for centuries. Although many academics, practitioners and policy makers have studied questions related to collapsing asset price bubbles, there is little consensus yet about their causes…
Accuracy of economic theories and efficiency of economic policy strictly depend on the choice of the economic variables and processes mostly liable for description of economic reality. That states the general problem of assessment of any…
A financial market is a system resulting from the complex interaction between participants in a closed economy. We propose a minimal microscopic model of the financial market economy based on the real economy's symmetry constraint and…
Econophysics is a new area developed recently by the cooperation between economists, mathematicians and physicists. It's not a tool to predict future prices of stocks and exchange rates. It applies idea, method and models in Statistical…
In complex systems, many different parts interact in non-obvious ways. Traditional research focuses on a few or a single aspect of the problem so as to analyze it with the tools available. To get a better insight of phenomena that emerge…
In recent years there has been a closer interrelationship between several scientific areas trying to obtain a more realistic and rich explanation of the natural and social phenomena. Among these it should be emphasized the increasing…
In speculative markets, risk-free profit opportunities are eliminated by traders exploiting them. Markets are therefore often described as "informationally efficient", rapidly removing predictable price changes, and leaving only residual…
The statistical description and modeling of volatility plays a prominent role in econometrics, risk management and finance. GARCH and stochastic volatility models have been extensively studied and are routinely fitted to market data, albeit…
This paper casts within a unified economic framework some key challenges for the global economic order: de-globalization; the rising impracticability of global cooperation; and the increasingly confrontational nature of Great Power…
The purpose of this research article is to discover how the econophysics analysis can complement the econometrics models in application to the risk management in the central banks and financial institutions, operating within the nonlinear…
There is a widespread recent interest in using ideas from statistical physics to model certain types of problems in economics and finance. The main idea is to derive the macroscopic behavior of the market from the random local interactions…
We suggest an original physical approach to describe the mechanism of market pricing. The core of our approach is to consider pricing at different time scales separately, using independent equations of motion. Such an approach leads to a…
Classical economics has developed an arsenal of methods, based on the idea of representative agents, to come up with precise numbers for next year's GDP, inflation and exchange rates, among (many) other things. Few, however, will disagree…
The aim of this study is to contribute to the theory of exogenous economic shocks and their equivalents in an attempt to explain business cycle fluctuations, which still do not have a clear explanation. To this end the author has developed…
This work critics on nature of thermodynamics coordinates and on roles of the variables in the equation of state (EoS). Coordinate variables in the EoS are analyzed so that central concepts are noticed and are used to lay a foundation in…