Part of the NATO Science Series II book series (NAII, volume 232)


We state the usual postulatory approach used by economists and then contrast it with our empirically based discovery of the dynamics of financial markets, where all predictions are calculated from ‘the market Green function’. In particular, we predict option prices in agreement with traders’ valuations, but without using any nonempirically determined parameters. Both global and local volatility are defined via the noise traders’ diffusion coefficient, and a new dynamic definition of ‘value’ is given. Self-fulfilling prophecies are discussed in the context of complexity.


Financial Market Real Market Noise Trader Local Volatility Liquidity Bath 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Alejandro-Quinones, L., Bassler, K.E., Gunaratne, G.H., McCauley, J.L., Field, M,. Nicol, I., Timofeyev, A., and Türük, A. 2005. A Theory of Fluctuations of Stock Price Fluctuations, submitted.Google Scholar
  2. Black, F. 1986. J. of Finance 3: 529.CrossRefADSGoogle Scholar
  3. Chhabra,A., Jensen., R.V., & Sreenivasan, K.R. 1988. Phys. Rev. A40: 4593.ADSGoogle Scholar
  4. Chow, G.C., and Kwan, Y.K. 1998. J. Monetary Econ. 41: 30.CrossRefGoogle Scholar
  5. Dacoroga, M.M., Ramazan, G., Müller, U.A., Olsen, R.B., and Picte, O.V. 2001. An Intro. to High Frequency Finance. Academic Pr., N.Y.Google Scholar
  6. McCauley, J.L. 2004. Dynamics of Markets: Econophysics and Finance. Cambridge Univ. Pr., Cambridge.zbMATHCrossRefGoogle Scholar
  7. Moore, C. 1990. Phys. Rev. Lett. 64,23;1991. Nonlinearity 4, 199 & 727.Google Scholar
  8. Renner, C., Peinke, J., & Friedric, R. 2001. Physica A298, 49.Google Scholar
  9. Skjeltorp, A.T. and Viscek, T. 2002. Complexity from Microscopic to Macroscopic Scales: Coherence and Large Deviations. Kluwer, Dordrecht.Google Scholar
  10. Soros, G. 2000. Open Society, Reforming Global Capitalism. Public Affairs: N.Y.Google Scholar
  11. G. Soros The Crisis of Global Capitalism (Little, Brown & Co.: N.Y., 1998).Google Scholar
  12. J.E. Stiglitz Globalization and its Discontents (Norton: N.Y., 2001).Google Scholar
  13. E.P. Wigner Symmetries and Reflections (Univ. Indiana: Bloomington, 1967).Google Scholar

Copyright information

© Springer 2006

Authors and Affiliations

    • 1
    • 1
    • 1
  1. 1.Physics DeptartmentUniversity of HoustonHoustonUSA

Personalised recommendations