ASYMMETRIES, CORRELATIONS AND FAT TAILS IN PERCOLATION MARKET MODEL

Iksoo Chang, Dietrich Stauffer () and Ras B. Pandey
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Iksoo Chang: Department of Physics, Pusan National University, Busan 609-735, South Korea
Dietrich Stauffer: Institute for Theoretical Physics, Cologne University, D-50923 Köln, Euroland;
Ras B. Pandey: Department of Physics and Astronomy, University of Southern Mississippi, Hattiesburg MS39406-5046, USA

International Journal of Theoretical and Applied Finance (IJTAF), 2002, vol. 05, issue 06, 585-597

Abstract: Modifications of the Cont-Bouchaud percolation model for price fluctuations give an asymmetry for time-reversal, an asymmetry between high and low prices, volatility clustering, effective multifractality, correlations between volatility and traded volume, and a power law tail with exponent near 3 for the cumulative distribution function of price changes. Combining them together still gives the same power law. Using Ising-correlated percolation does not change these results. Different modifications give log-periodic oscillations before a crash, arising from nonlinear feedback between random fluctuations.

Keywords: Cont-Bouchaud model; return distribution; multifractality; asymmetry (search for similar items in EconPapers)
Date: 2002
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DOI: 10.1142/S0219024902001584

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