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An agent behavior based model for diffusion price processes with application to phase transition and oscillations

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  • Christof Henkel

Abstract

We present an agent behavior based microscopic model for diffusion price processes. As such we provide a model not only containing a convenient framework for describing socio-economic behavior, but also a sophisticated link to price dynamics. We furthermore establish the circumstances under which the dynamics converge to diffusion processes in the large market limit. To demonstrate the applicability of a separation of behavior and price process, we show how herding behavior of market participants can lead to equilibria transition and oscillations in diffusion price processes.

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  • Christof Henkel, 2016. "An agent behavior based model for diffusion price processes with application to phase transition and oscillations," Papers 1606.08269, arXiv.org.
    • Handle: RePEc:arx:papers:1606.08269
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    References listed on IDEAS

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    Cited by:

    1. Christof Henkel, 2016. "From quantum mechanics to finance: Microfoundations for jumps, spikes and high volatility phases in diffusion price processes," Papers 1609.05286, arXiv.org, revised Oct 2016.
    2. Henkel, Christof, 2017. "From quantum mechanics to finance: Microfoundations for jumps, spikes and high volatility phases in diffusion price processes," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 469(C), pages 447-458.

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