Related papers: A microscopic model of triangular arbitrage
We review some statistical many-agent models of economic and social systems inspired by microscopic molecular models and discuss their stochastic interpretation. We apply these models to wealth exchange in economics and study how the…
Microstructure of market dynamics is studied through analysis of tick price data. Linear trend is introduced as a tool for such analysis. Trend arbitrage inequality is developed and tested. The inequality sets limiting relationship between…
The author seeks to develop a model to alter the bid-offer spread, currently quoted by market makers, that varies with the market and trading conditions. The dynamic nature of financial markets and trading, as with the rest of social…
Geometric arbitrage theory reformulates a generic asset model possibly allowing for arbitrage by packaging all asset and their forward dynamics into a stochastic principal fibre bundle, with a connection whose parallel transport encodes…
Stock price change in financial market occurs through transactions in analogy with diffusion in stochastic physical systems. The analysis of price changes in real markets shows that long-range correlations of price fluctuations largely…
The paper presents two new approaches to modeling the interaction of small and medium pricetaking traders with a stock exchange. In the framework of these approaches, the traders can form and manage their portfolios of financial instruments…
We proposed a model of interacting market agents based on the Ising spin model. The agents can take three actions: "buy," "sell," or "stay inactive." We defined a price evolution in terms of the system magnetization. The model reproduces…
Macro-economic models describe the dynamics of economic quantities. The estimations and forecasts produced by such models play a substantial role for financial and political decisions. In this contribution we describe an approach based on…
This paper deals with the modeling and mathematical analysis of vehicular traffic phenomena according to a kinetic theory approach, where the microscopic state of vehicles is described by: (i) position, (ii) velocity, as a continuous…
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…
Designing a financial market that works well is very important for developing and maintaining an advanced economy, but is not easy because changing detailed rules, even ones that seem trivial, sometimes causes unexpected large impacts and…
In a Markovian model for a financial market, we characterize the best arbitrage with respect to the market portfolio that can be achieved using nonanticipative investment strategies, in terms of the smallest positive solution to a parabolic…
New continuous and stochastic extensions of the minority game, devised as a fundamental model for a market of competitive agents, are introduced and studied in the context of statistical physics. The new formulation reproduces the key…
We propose a continuum model for the description of buyer and seller dynamics in an Internet market. The relevant variables are the research effort of buyers and the sellers' reputation building process. We show that, if a commercial…
Kinetic exchange models have been successful in explaining the shape of the income/wealth distribution in the economies. However, such models usually make some ad-hoc assumptions when it comes to determining the savings factor. Here, we…
The vast majority of market impact studies assess each product individually, and the interactions between the different order flows are disregarded. This strong approximation may lead to an underestimation of trading costs and possible…
We introduce solvable stochastic dealer models, which can reproduce basic empirical laws of financial markets such as the power law of price change. Starting from the simplest model that is almost equivalent to a Poisson random noise…
We introduce and study a non-equilibrium continuous-time dynamical model of the price of a single asset traded by a population of heterogeneous interacting agents in the presence of uncertainty and regulatory constraints. The model takes…
If financial markets displayed the informational efficiency postulated in the efficient markets hypothesis (EMH), arbitrage operations would be self-extinguishing. The present paper considers arbitrage sequences in foreign exchange (FX)…
A prototype model of stock market is introduced and studied numerically. In this self-organized system, we consider only the interaction among traders without external influences. Agents trade according to their own strategy, to accumulate…