A SIMPLE MODEL OF PRICE FORMATION

Katarzyna Sznajd-Weron and R. Weron ()
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R. Weron: Hugo Steinhaus Center, Wrocław University of Technology, Wyspianskiego 27, 50-370 Wrocław, Poland
Authors registered in the RePEc Author Service: Rafał Weron

International Journal of Modern Physics C (IJMPC), 2002, vol. 13, issue 01, 115-123

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.

Keywords: Ising model; agent-based model; econophysics; price dynamics (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (23)

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Working Paper: A simple model of price formation (2001)
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DOI: 10.1142/S0129183102003000

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