Share Email Print

Proceedings Paper

Dynamical model of foreign exchange markets leading to Tsallis distribution
Format Member Price Non-Member Price
PDF $17.00 $21.00

Paper Abstract

We present a model of financial markets originally proposed for a turbulent flow, as a dynamic basis of its intermittent behavior. Time evolution of the price change is assumed to be described by Brownian motion in a power-law potential, where the 'temperature' fluctuates slowly. The model generally yields a fat-tailed distribution of the price change. Specifically a Tsallis distribution is obtained if the inverse temperature is χ2-distributed, which qualitatively agrees with intraday data of foreign exchange market. The so-called 'volatility', a quantity indicating the risk or activity in financial markets, corresponds to the temperature of markets and its fluctuation leads to intermittency.

Paper Details

Date Published: 7 May 2003
PDF: 7 pages
Proc. SPIE 5114, Noise in Complex Systems and Stochastic Dynamics, (7 May 2003); doi: 10.1117/12.488772
Show Author Affiliations
Naoki Kozuki, Hitachi High-Technologies Corp. (Japan)
Nobuko Fuchikami, Tokyo Metropolitan Univ. (Japan)

Published in SPIE Proceedings Vol. 5114:
Noise in Complex Systems and Stochastic Dynamics
Lutz Schimansky-Geier; Derek Abbott; Alexander Neiman; Christian Van den Broeck, Editor(s)

© SPIE. Terms of Use
Back to Top
Sign in to read the full article
Create a free SPIE account to get access to
premium articles and original research
Forgot your username?