Regensburg 2010 – wissenschaftliches Programm

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SOE: Fachverband Physik sozio-ökonomischer Systeme

SOE 23: Financial Markets and Risk Management III

SOE 23.5: Vortrag

Freitag, 26. März 2010, 12:30–13:00, H44

Simulation of market behaviour by means of a non-equilibrium molecular dynamics set-up. — •Simon Standaert and Jan Ryckebusch — Department of Physics and Astronomy, Ghent University, Proeftuinstraat 86, B-9000 Gent

To understand the non-Gaussianity of markets on an elementary level, we propose to use a Molecular Dynamics (MD) set-up, as this is a very elementary and well understood technique that can analyse the behaviour of interacting agents on a large scale.

In a normal MD simulation, the displacement of the agents is strictly random and Gaussian. To simulate a non-Gaussian random walk in a liquid-like environment, we propose to use out-of-equilibrium dynamics. This dynamics is achieved by a parameter that changes the size of the particles and thus the density of the system. Immediately after such a change, the system enters a period of non-equilibrium behaviour through the addition of kinetic energy.

We investigate this system because it can produce a deeper understanding of the mechanisms in a market that lead to the non-Gaussianity that is observed in real markets. We can reproduce the statistics of the volatility of the markets in our system and we are able to link our time of the simulation to real market-time via the correlation functions.

In our MD set-up we can attribute different characteristics to every single particle to maximize the heterogeneity of the system or we can simulate the behaviour of an index.