On the emergence of critical behavior in evolving financial networks

Details On the emergence of critical behavior in evolving financial networks On the emergence of critical behavior in evolving financial networks

2010-09-29

arxiv.org/abs/1009.5830v1

Economy

Quantitative Finance

General Finance

4 pages, 4 figures

Scientific paper

We introduce a simple model for addressing the controversy in the study of financial systems, sometimes taken as brownian-like processes and other as critical systems with fluctuations of arbitrary magnitude. The model considers a collection of economical agents which establish trade connections among them according to basic economical principles properly translated into physical properties and interaction. With our model we are able to reproduce the evolution of macroscopic quantities (indices) and to correctly retrieve the common exponent value characterizing several indices in financial markets, relating it to the underlying topology of connections.

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