| Article ID | Journal | Published Year | Pages | File Type |
|---|---|---|---|---|
| 1863051 | Physics Letters A | 2011 | 5 Pages |
The prices of financial products in markets are determined by the behavior of investors, who are influenced by positive and negative news. Here, we present a mathematical model to reproduce the price movements in real financial markets affected by news. The model has both positive and negative feed-back mechanisms. Furthermore, the behavior of the model is examined by considering two types of noise. Our results show that the dynamic balance of positive and negative feed-back mechanisms with the noise effect determines the asset price movement.
► We present a model for the dynamic behavior of the price affected by news. ► Both positive and negative feed-back mechanisms determine the price movement. ► We use forex historical data when Tohoku–Kanto earthquake occurred. ► Adding noise to the model, the distribution of price agrees with that of real data. ► The sample path in the simulation reproduces well the real market motion.
