Price dynamics of the financial markets using the stochastic differential equation for a potential double well

L.S. Lima and L.L.B. Miranda

Physica A: Statistical Mechanics and its Applications, 2018, vol. 490, issue C, 828-833

Abstract: We have used the Itô’s stochastic differential equation for the double well with additive white noise as a mathematical model for price dynamics of the financial market. We have presented a model which allows us to test within the same framework the comparative explanatory power of rational agents versus irrational agents, with respect to the facts of financial markets. We have obtained the mean price in terms of the β parameter that represents the force of the randomness term of the model.

Keywords: Double well; Price dynamics; Stochastic differential equation (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:490:y:2018:i:c:p:828-833

DOI: 10.1016/j.physa.2017.08.106

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