One-dimensional maps with two discontinuity points and three linear branches: mathematical lessons for understanding the dynamics of financial markets

Fabio Tramontana, Frank Westerhoff and Laura Gardini ()

Decisions in Economics and Finance, 2014, vol. 37, issue 1, 27-51

Abstract: We develop a simple financial market model with heterogeneous interacting speculators. The dynamics of our model is driven by a one-dimensional discontinuous piecewise linear map, having two discontinuity points and three linear branches. On the one hand, we study this map analytically and numerically to advance our knowledge about such dynamical systems. In particular, not much is known about discontinuous maps involving three branches. On the other hand, we seek to improve our understanding of the functioning of financial markets. We find, for instance, that such maps can generate complex bull and bear market dynamics. Copyright Springer-Verlag Italia 2014

Keywords: Financial crises; Bull and bear dynamics; Discontinuous piecewise linear maps; Border collision bifurcations; Adding scheme (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (8)

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DOI: 10.1007/s10203-013-0145-y

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