The Minimal Model of Financial Complexity

Details The Minimal Model of Financial Complexity The Minimal Model of Financial Complexity

2009-01-24

arxiv.org/abs/0901.3812v2

Economy

Quantitative Finance

Trading and Market Microstructure

changed from LaTeX to Word; accepted for publication in Quantitative Finance

Scientific paper

A representative investor generates realistic and complex security price paths by following this trading strategy: if, a few ticks ago, the market asset had two consecutive upticks or two consecutive downticks, then sell, and otherwise buy. This simple, unique, and robust model is the smallest possible deterministic model of financial complexity, and its generalization leads to complex variety. Compared to a random walk, the minimal model generates time series with fatter tails and more frequent crashes, thus more closely matching the real world. It does all this without any parameter fitting.

Affiliated with

Also associated with

No associations

Rating

The Minimal Model of Financial Complexity does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.

If you have personal experience with The Minimal Model of Financial Complexity, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and The Minimal Model of Financial Complexity will most certainly appreciate the feedback.

Rate now

Comments { 0 }

Profile ID: LFWR-SCP-O-454369