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A new space-time model for volatility clustering in the financial market

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  • Maria Boguta
  • Eric J\"arpe
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    Abstract

    A new space-time model for interacting agents on the financial market is presented. It is a combination of the Curie-Weiss model and a space-time model introduced by J\"arpe 2005. Properties of the model are derived with focus on the critical temperature and magnetization. It turns out that the Hamiltonian is a sufficient statistic for the temperature parameter and thus statistical inference about this parameter can be performed. Thus e.g. statements about how far the current financial situation is from a financial crisis can be made, and financial trading stability be monitored for detection of malicious risk indicating signals.

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    File URL: http://arxiv.org/pdf/1002.0609
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    Bibliographic Info

    Paper provided by arXiv.org in its series Papers with number 1002.0609.

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    Date of creation: Feb 2010
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    Handle: RePEc:arx:papers:1002.0609

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    1. Kaizoji, Taisei, 2000. "Speculative bubbles and crashes in stock markets: an interacting-agent model of speculative activity," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 287(3), pages 493-506.
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