The Minimal Model of Financial Complexity

Philip Maymin

Papers from arXiv.org

Abstract: A representative investor generates realistic and complex security price paths by following this trading strategy: if, a few ticks ago, the market asset had two consecutive upticks or two consecutive downticks, then sell, and otherwise buy. This simple, unique, and robust model is the smallest possible deterministic model of financial complexity, and its generalization leads to complex variety. Compared to a random walk, the minimal model generates time series with fatter tails and more frequent crashes, thus more closely matching the real world. It does all this without any parameter fitting.

Date: 2009-01, Revised 2010-02
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/0901.3812 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:0901.3812

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().