A threshold Potts model of financial markets |
| Paweł Sieczka , Janusz A. Holyst |
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Warsaw University of Technology, Faculty of Physics and Cent.of Exc.for Complex Systems Research, Koszykowa 75, Warszawa 00-662, Poland |
| Abstract |
We proposed a model of interacting market agents based on the Potts spin model. The agents can take three actions: "buy," "sell," or "stay inactive." We defined a price evolution in terms of magnetization of the system. The model reproduces main stylized facts of real markets such as: fat-tailed distribution of returns, volatility clustering and a power-low decay of autocorrelation of absolute returns. |
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