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Spin models as microfoundation of macroscopic financial market models


  • Sebastian M. Krause
  • Stefan Bornholdt


Macroscopic price evolution models are commonly used for investment strategies. There are first promising achievements in defining microscopic agent based models for the same purpose. Microscopic models allow a deeper understanding of mechanisms in the market than the purely phenomenological macroscopic models, and thus bear the chance for better models for market regulation. We exemplify this strategy in a case study, deducing a macroscopic Langevin equation from a microscopic spin market model closely related to the Ising model. The interplay of the microscopic and the macroscopic view allows for a better understanding of the microscopic model, as well, and may guide the construction of agent based market models as basis of macroscopic price models.

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  • Sebastian M. Krause & Stefan Bornholdt, 2011. "Spin models as microfoundation of macroscopic financial market models," Papers 1103.5345,
  • Handle: RePEc:arx:papers:1103.5345

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    Cited by:

    1. Tetsuya Takaishi, 2014. "Analysis of Spin Financial Market by GARCH Model," Papers 1409.0118,
    2. repec:wsi:acsxxx:v:18:y:2015:i:03n04:n:s0219525915500113 is not listed on IDEAS

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