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Expectations, Price Fluctuations and Lorenz Attractor

Olkhov, Victor (2018): Expectations, Price Fluctuations and Lorenz Attractor.

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This paper describes expectations and Buy-Sell transactions of selected Stokes between economic agents and Exchange on economic space as ground for modeling trading volume and price fluctuations. We study simple model of mutual relations between transactions and expectations and derive economic equations that describe disturbances of price, trading volume and expectations. We obtain simple harmonic oscillations for price fluctuations. We show that our model economic equations can take form of Lorenz attractor. Our approximation of transactions and expectations and economic equations on disturbances of price, trading volume and expectations allows apply dynamical systems methods for modeling chaotic behavior of economic and financial systems.

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