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Nonlinear stochastic exclusion financial dynamics modeling and time-dependent intrinsic detrended cross-correlation

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  • Zhang, Wei
  • Wang, Jun

Abstract

In attempt to reproduce price dynamics of financial markets, a stochastic agent-based financial price model is proposed and investigated by stochastic exclusion process. The exclusion process, one of interacting particle systems, is usually thought of as modeling particle motion (with the conserved number of particles) in a continuous time Markov process. In this work, the process is utilized to imitate the trading interactions among the investing agents, in order to explain some stylized facts found in financial time series dynamics. To better understand the correlation behaviors of the proposed model, a new time-dependent intrinsic detrended cross-correlation (TDI-DCC) is introduced and performed, also, the autocorrelation analyses are applied in the empirical research. Furthermore, to verify the rationality of the financial price model, the actual return series are also considered to be comparatively studied with the simulation ones. The comparison results of return behaviors reveal that this financial price dynamics model can reproduce some correlation features of actual stock markets.

Suggested Citation

  • Zhang, Wei & Wang, Jun, 2017. "Nonlinear stochastic exclusion financial dynamics modeling and time-dependent intrinsic detrended cross-correlation," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 482(C), pages 29-41.
    • Handle: RePEc:eee:phsmap:v:482:y:2017:i:c:p:29-41
    DOI: 10.1016/j.physa.2017.04.033
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