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Threshold Model for Triggered Financial Bubbles on Networks

Marcel Ausloos ,  Filippo Petroni 

Abstract

In order to give an alternative to the creation of financial bubbles, a theoretical model for information spreading on a financial network made of agents at nodes is studied. The effect of an external field is considered. The original part contains the implementation that the financial bubble is only triggered when a local variable (a so called activity awareness) reaches and goes above a threshold. The dynamical rules are constrained to be as simple as possible, in order to sort out the basic features; more elaborated variants can be imgined and are proposed to come closer to realistic cases. Several results, using methods from non-equilibrium statistical mechanics, are obtained for a Erdos-Renyi network. They are interpreted through simple analytical laws, scale free or logistic map-like concepts, i.e., for (i) the sizes, durations, and number of activity awareness avalanches, including their respective distributions, (ii) the number of times the external field is applied to one possible node (= agent) before all network nodes are found to be above the threshold, (iii) the number of nodes still below the threshold and (iv) the number of ''hot'' nodes (close to threshold) at each time step. No log-periodic structure is found in the present case, - as expected.

 

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Related papers

Presentation: Oral at International Conference on Economic Science with Heterogeneous Interacting Agents 2008, by Marcel Ausloos
See On-line Journal of International Conference on Economic Science with Heterogeneous Interacting Agents 2008

Submitted: 2008-03-01 18:35
Revised:   2009-06-07 00:48