Microscopic Market Models
In the preceding chapters, we described the price fluctuations of financial assets in statistical terms. We did not ask questions about their origin, and how they are related to individual investment decisions. In the language of physics, our approach was macroscopic and phenomenological. We considered macrovariables (prices, returns, volatilities) and checked the internal consistency of the phenomena observed. In this chapter, we wish to discuss how these macroscopic observables are possibly related to the microscopic structure and rules governing capital markets. We inquire about the relation of microscopic function and macroscopic expression.
KeywordsNash Equilibrium Stock Price Price Change Trading Volume Trading Strategy
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