A threshold model of financial markets
classification
💱 q-fin.ST
physics.soc-ph
keywords
modelagentsmarketsactionsclusteringdefineddistributionevolution
read the original abstract
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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