A threshold model of financial markets

Details A threshold model of financial markets A threshold model of financial markets

2007-11-20

arxiv.org/abs/0711.3106v3

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

Economy

Quantitative Finance

Statistical Finance

Scientific paper

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.

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