A new space-time model for volatility clustering in the financial market

Maria Boguta and Eric J\"arpe

Papers from arXiv.org

Abstract: A new space-time model for interacting agents on the financial market is presented. It is a combination of the Curie-Weiss model and a space-time model introduced by J\"arpe 2005. Properties of the model are derived with focus on the critical temperature and magnetization. It turns out that the Hamiltonian is a sufficient statistic for the temperature parameter and thus statistical inference about this parameter can be performed. Thus e.g. statements about how far the current financial situation is from a financial crisis can be made, and financial trading stability be monitored for detection of malicious risk indicating signals.

Date: 2010-02
New Economics Papers: this item is included in nep-ets and nep-rmg
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