Related papers: Theory of market fluctuations
We present a set of models of the main stylized facts of market price fluctuations. These models comprise dynamical evolution with threshold dynamics and Langevin price equation with multiplicative noise, percolation models to describe the…
We present a model of financial markets originally proposed for a turbulent flow, as a dynamic basis of its intermittent behavior. Time evolution of the price change is assumed to be described by Brownian motion in a power-law potential,…
In this paper we provide a comprehensive analysis of a structural model for the dynamics of prices of assets traded in a market originally proposed in [1]. The model takes the form of an interacting generalization of the geometric Brownian…
We consider a market where many agents trade many different types of products with each other. We model development of collective modes in this market, and quantify these by fluctuations that scale with time with a Hurst exponent of about…
The distribution of price returns for a class of uncorrelated diffusive dynamics is considered. The basic assumptions are (1) that there is a "consensus" value associated with a stock, and (2) that the rate of diffusion depends on the…
Using Trades and Quotes data from the Paris stock market, we show that the random walk nature of traded prices results from a very delicate interplay between two opposite tendencies: long-range correlated market orders that lead to…
We study the distributions of money in a simple closed economic system for different types of monetary transactions. We know that for arbitrary and random sharing but locally conserving money transactions, the money distribution goes to the…
One approach to the analysis of stochastic fluctuations in market prices is to model characteristics of investor behaviour and the complex interactions between market participants, with the aim of extracting consequences in the aggregate.…
Several problems arising in Economics and Finance are analyzed using concepts and quantitative methods from Physics. Here is the abridged abstact: Chapter 1: By analogy with energy, the equilibrium probability distribution of money must…
The financial market is nonpredictable, as according to the Bachelier, the mathematical expectation of the speculator is zero. Nevertheless, we observe in the price fluctuations the two distinct scales, short and long time. Behaviour of a…
The key idea of this model is that firms are the result of an evolutionary process. Based on demand and supply considerations the evolutionary model presented here derives explicitly Gibrat's law of proportionate effects as the result of…
Detailed empirical studies of publicly traded business firms have established that the standard deviation of annual sales growth rates decreases with increasing firm sales as a power law, and that the sales growth distribution is…
Scaling properties in financial fluctuations are reviewed from the standpoint of statistical physics. We firstly show theoretically that the balance of demand and supply enhances fluctuations due to the underlying phase transition…
High frequency data in finance have led to a deeper understanding on probability distributions of market prices. Several facts seem to be well stablished by empirical evidence. Specifically, probability distributions have the following…
A new theory for pricing options of a stock is presented. It is based on the assumption that while successive variations in return are uncorrelated, the frequency with which a stock is traded depends on the value of the return. The solution…
As a typical representation of complex networks studied relatively thoroughly, financial market presents some special details, such as its nonconservation and opinions spreading. In this model, agents congregate to form some clusters, which…
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…
Zipf's law states that the frequency of an observation with a given value is inversely proportional to the square of that value; Taylor's law, instead, describes the scaling between fluctuations in the size of a population and its mean.…
We introduce a mean-field type approximation for description of company's income statistics. Utilizing huge company data we show that a discrete version of Langevin equation with additive and multiplicative noises can appropriately describe…
Phenomena as diverse as breeding bird populations, the size of U.S. firms, money invested in mutual funds, the GDP of individual countries and the scientific output of universities all show unusual but remarkably similar growth…