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arXiv · 0809.0481

Solvable Stochastic Dealer Models for Financial Markets

Kenta Yamada·Hideki Takayasu·Takatoshi Ito·Misako Takayasu
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Abstract

We introduce solvable stochastic dealer models, which can reproduce basic empirical laws of financial markets such as the power law of price change. Starting from the simplest model that is almost equivalent to a Poisson random noise generator, the model becomes fairly realistic by adding only two effects, the self-modulation of transaction intervals and a forecasting tendency, which uses a moving average of the latest market price changes. Based on the present microscopic model of markets, we find a quantitative relation with market potential forces, which has recently been discovered in the study of market price modeling based on random walks.

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Kenta Yamada, Hideki Takayasu, Takatoshi Ito, Misako Takayasu. 2008-09-20. Solvable Stochastic Dealer Models for Financial Markets. https://doi.org/10.1103/physreve.79.051120

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