A simple model of price formation
Authored by K Sznajd-Weron, R Weron
Date Published: 2002-01
DOI: 10.1142/s0129183102003000
Sponsors:
Polish Committee for Scientific Research
Platforms:
No platforms listed
Model Documentation:
Other Narrative
Model Code URLs:
Model code not found
Abstract
A simple Ising spin model, which can describe the mechanism of price formation in financial markets is proposed. In contrast to other agent-based models, the influence does not flow inward from the surrounding neighbors to the center site, but spreads outward from the center to the neighbors. The model thus describes the spread of opinions among traders. It is shown via standard Monte Carlo simulations that very simple rules lead to dynamics that duplicate those of asset prices.
Tags
Agent-based model
econophysics
Price dynamics
Ising model