Related papers: The thermodynamic approach to market
This paper introduces a novel approach to financial crisis prediction by establishing a thermodynamic-like framework derived from the fluctuation theorem of statistical physics. We define market temperature through the probability ratio of…
The paper argues that attracting more economists and adopting a more-precise definition of dynamic complexity might help econophysics acquire more attention in the economics community and bring new lymph to economic research. It may be…
We consider a control problem for a heterogeneous population composed of agents able to switch at any time between different options. The controller aims to maximize an average gain per time unit, supposing that the population is of…
The price fluctuations in the financial markets are the result of the individual operations by many individual investors. However for many decades the finacial theory did not use directly this "microscopic representation". The difficulties…
In this paper, we study two standard (Keynesian) dynamic macroeconomic models (one is piecewise linear and the other is nonlinear). Our purpose is twofold: (1)~For each model, we give a complete characterisation for the existence of a…
The problem of the insensitivity of the macroscopic behavior of any thermodynamical system to partitioning generates a bias between the reproducibility of its macroscopic behavior viewed as the simplest form of causality and its long-term…
Do we know if a short selling ban or a Tobin Tax result in more stable asset prices? Or do they in fact make things worse? Just like medicine regulatory measures in financial markets aim at improving an already complex system. And just like…
We propose a new formulation of stochastic thermodynamics for systems subjected to nonequilibrium constraints (i.e. broken detailed balance at steady state) and furthermore driven by external time-dependent forces. A splitting of the second…
Every production-recycling iteration accumulates an inevitable proportion of its matter-energy in the environment, lest the production process itself would be a system in perpetual motion, violating the second law of Thermodynamics. Such…
Modern physics has demonstrated that matter behaves very differently as it approaches the speed of light. This paper explores the implications of modern physics to the operation and regulation of financial markets. Information cannot move…
Machine learning (especially reinforcement learning) methods for trading are increasingly reliant on simulation for agent training and testing. Furthermore, simulation is important for validation of hand-coded trading strategies and for…
The sustainability conditions for the market participants with a different ownership model were also determined. It was revealed, that the nonlinear form of the equations describing the market behavior with the prevailing private capital,…
The present paper analyses the formal parallelism existing between the laws of thermodynamics and some economic principles. Based on previous works, we shall show how the existence in Economics of principles analogous to those in…
The paper proposes a new stochastic intervention control model conducted in various commodity and stock markets. The essence of the phenomenon of intervention is described in accordance with current economic theory. A review of papers on…
Competition has been introduced in the electricity markets with the goal of reducing prices and improving efficiency. The basic idea which stays behind this choice is that, in competitive markets, a greater quantity of the good is exchanged…
The past twenty years have seen a resurgence of interest in nonequilibrium thermodynamics, thanks to advances in the theory of stochastic processes and in their thermodynamic interpretation. Fluctuation theorems provide fundamental…
Economies are complex man-made systems where organisms and markets interact according to motivations and principles not entirely understood yet. The increasing dissatisfaction with the postulates of traditional economics i.e. perfectly…
A new approach to the understanding of complex behavior of financial markets index using tools from thermodynamics and statistical physics is developed. Physical complexity, a magnitude rooted in Kolmogorov-Chaitin theory is applied to…
A simple and effective approach to thermodynamics is suggested, which solves the major difficulties in the traditional presentation of the subject. The internal energy is introduced from the behavior of deformable bodies, whereas the…
This paper presents a novel study on gas-like models for economic systems. The interacting agents and the amount of exchanged money at each trade are selected with different levels of randomness, from a purely random way to a more chaotic…