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AKSOE: Arbeitskreis Physik sozio-ökonomischer Systeme

AKSOE 14: Financial Markets and Risk Management III

AKSOE 14.3: Talk

Thursday, March 29, 2007, 15:00–15:30, H8

An evolving Potts model of financial markets with threefold imput agents — •Georges Harras and Didier Sornette — ETH Zürich, Chair of Entrepreneurial Risks, Zürich, Switzerland

We study a model of financial price dynamics based on the Potts model with trading agents which, at every time step, can act in three possible ways: sell, buy or remain inactive. The price dynamics result from the aggregation of these actions. The agents base their decision on three different kinds of information: personal information, public information (news) and information from their neighbors (imitation). The impact of these latter two on the decision making process are coupled to their past prediction power and evolve in time. Our model is able to reproduce the major stylized facts, relating them to the subtle interplay of the endogenous factors and exogenous information.