Kinetic models for socio-economic dynamics of speculative markets

Details Kinetic models for socio-economic dynamics of speculative markets Kinetic models for socio-economic dynamics of speculative markets

2010-09-28

arxiv.org/abs/1009.5499v1

Economy

Quantitative Finance

Trading and Market Microstructure

Scientific paper

In this paper we introduce a simple model for a financial market characterized by a single stock or good and an interplay between two different traders populations, chartists and fundamentalists, which determine the price dynamic of the stock. The model has been inspired by the microscopic Lux-Marchesi model (T.Lux, M.Marchesi, Nature 397, (1999), 498--500). The introduction of kinetic equations permits to study the asymptotic behavior of the investments and the price distributions and to characterize the regimes of lognormal behavior and the formation of power law tails.

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