We develop a framework based on microeconomic theory from which the ideal gas like market models can be addressed. A kinetic exchange model based on that framework is proposed and its distributional features have been studied by considering its moments. Next, we derive the moments of the CC...

We establish an analogy between the motion of spring whose mass increases linearly with time and volatile stock market dynamics within an economic model based on simple temporal demand and supply functions [E. Canessa, J. Phys. A 33 (2000) 3637]. The total system energy Et is shown to be...

There is no term that better describes the essential features of human society than complexity. On various levels, from the decision-making processes of individuals, through to the interactions between individuals leading to the spontaneous formation of groups and social hierarchies, up to the...

In this paper we propose to use the principle of absence of arbitrage opportunities in its entropic interpretation to obtain the distribution of stock price fluctuations by maximizing its information entropy. We show that this approach leads to a physical description of the underlying dynamics...

Following the thermodynamic formulation of a multifractal measure that was shown to enable the detection of large fluctuations at an early stage, here we propose a new index which permits us to distinguish events like financial crises in real time. We calculate the partition function from which...

A simple agent-based model is used to propose an explanation of the source of long-run memory in financial markets. It is shown that the resulting model is equivalent to a neutral-type differential equation in the price dynamics, which displays a persistence property that can be related to...

We first show that there are in fact triangular arbitrage opportunities in the spot foreign exchange markets, analyzing the time dependence of the yen–dollar rate, the dollar–euro rate and the yen–euro rate. Next, we propose a model of foreign exchange rates with an interaction. The model...

We present a simple microscopic model of financial markets based on belief propagation in order to simulate the dynamics of the stock markets. A two-dimensional small-world communication structure is introduced in our model and the beliefs of market leaders spread on the network which results in...