A threshold model of financial markets

2007/11/30 by Paweł Sieczka, Janusz A. Hołyst · 1 citation
Economics, Econometrics and Finance · Physics and Astronomy · #q-fin.ST #physics.soc-ph

paper · pdf

published as Acta Physica Polonica A 114 (3): 458-648 (2008)

arxiv created 2008/06/24 · arxiv updated 2009/12/01

Abstract

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 main stylized facts of real markets such as: fat-tailed distribution of returns and volatility clustering.

Cited by

• Phase Transitions in Financial Markets Using the Ising Model: A Statistical Mechanics Perspective

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