Financial Brownian Particle in the Layered Order Book Fluid and Fluctuation-Dissipation Relations

Yoshihiro Yura, Hideki Takayasu, Didier Sornette and Misako Takayasu
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Yoshihiro Yura: Tokyo Institute of Technology
Hideki Takayasu: Sony Computer Science Laboratories
Didier Sornette: ETH Zürich - Department of Management, Technology, and Economics (D-MTEC); Swiss Finance Institute
Misako Takayasu: Tokyo Institute of Technology

No 14-06, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We introduce a novel description of the dynamics of the order book of financial markets as that of an effective colloidal Brownian particle embedded in fluid particles. The analysis of a comprehensive market data enables us to identify all motions of the fluid particles. Correlations between the motions of the Brownian particle and its surrounding fluid particles reflect specific layering interactions; in the inner-layer, the correlation is strong and with short memory while, in the outer-layer, it is weaker and with long memory. By interpreting and estimating the contribution from the outer-layer as a drag resistance, we demonstrate the validity of the fluctuation-dissipation relation (FDR) in this non-material Brownian motion process.

Keywords: order book; Brownian particle; fluctuation-dissipation; dollar-yen (search for similar items in EconPapers)
JEL-codes: C00 G10 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2014-02
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1406

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