Professor Misako Takayasu of Tokyo Institute of Technology and others analyzed the trading order records of the dollar-yen market at the individual trader level and succeeded in theoretically deriving various characteristics of the market using the Boltzmann equation.
It has been known for more than 100 years that price fluctuations in financial markets behave stochastically and randomly, and this movement is very similar to the Brownian motion of fine particles floating in water.However, it was not known why material and financial market phenomena behave similarly.
This time, the group analyzes individual order log data of buy and sell orders in the dollar-yen market provided for academic research, and follows when traders are on an up (down) trend based on past price changes. For the first time, he quantitatively showed that he adopted a trend-following strategy to raise (lower) his limit price.Furthermore, by constructing a market model by a group of traders incorporating these rules of conduct and associating market prices with Brownian particles and limit orders with water molecules that collide with Brownian particles, the Brownian motion and financial markets are the same. We have shown that it can be reduced to an equation.This clarified from the micro level why two phenomena in completely different fields, which have been a mystery for many years, are similar.
Theoretical analysis by the Boltzmann equation has all the basic characteristics such as price fluctuations and distribution of buy and sell orders consistent with the actual market characteristics, and various applications such as elucidating the mechanism of financial market surges and collapses in the future. Expected to be used in research.
