Replicating financial market dynamics with a simple self-organized critical lattice model

We explore a simple lattice field model intended to describe statistical properties of high frequency financial markets. The model is relevant in the cross-disciplinary area of econophysics. Its signature feature is the emergence of a self-organized critical state. This implies scale invariance of the model, without tuning parameters. Prominent results of our simulation are time series of gains, prices, volatility, and gains frequency distributions, which all compare favorably to features of historical market data. Applying a standard GARCH(1,1) fit to the lattice model gives results that are almost indistinguishable from historical NASDAQ data.Comment: 20 pages, 33 figure

Power spectrum of mass and activity fluctuations in a sandpile

We consider a directed abelian sandpile on a strip of size $2\times n$, driven by adding a grain randomly at the left boundary after every $T$ time-steps. We establish the exact equivalence of the problem of mass fluctuations in the steady state and the number of zeroes in the ternary-base representation of the position of a random walker on a ring of size $3^n$. We find that while the fluctuations of mass have a power spectrum that varies as $1/f$ for frequencies in the range $3^{-2n} \ll f \ll 1/T$, the activity fluctuations in the same frequency range have a power spectrum that is linear in $f$.Comment: 8 pages, 10 figure

The origin of power-law distributions in self-organized criticality

The origin of power-law distributions in self-organized criticality is investigated by treating the variation of the number of active sites in the system as a stochastic process. An avalanche is then regarded as a first-return random walk process in a one-dimensional lattice. Power law distributions of the lifetime and spatial size are found when the random walk is unbiased with equal probability to move in opposite directions. This shows that power-law distributions in self-organized criticality may be caused by the balance of competitive interactions. At the mean time, the mean spatial size for avalanches with the same lifetime is found to increase in a power law with the lifetime.Comment: 4 pages in RevTeX, 3 eps figures. To appear in J.Phys.G. To appear in J. Phys.

Self-Organized Criticality model for Brain Plasticity

Networks of living neurons exhibit an avalanche mode of activity, experimentally found in organotypic cultures. Here we present a model based on self-organized criticality and taking into account brain plasticity, which is able to reproduce the spectrum of electroencephalograms (EEG). The model consists in an electrical network with threshold firing and activity-dependent synapse strenghts. The system exhibits an avalanche activity power law distributed. The analysis of the power spectra of the electrical signal reproduces very robustly the power law behaviour with the exponent 0.8, experimentally measured in EEG spectra. The same value of the exponent is found on small-world lattices and for leaky neurons, indicating that universality holds for a wide class of brain models.Comment: 4 pages, 3 figure

Plastic Flow, Voltage Bursts, and Vortex Avalanches in Superconductors

We use large-scale parallel simulations to compute the motion of superconducting magnetic vortices during avalanches triggered by small field increases. We find that experimentally observable voltage bursts correspond to pulsing vortex movement along branched channels or winding chains, and relate vortex flow images to features of statistical distributions. As pin density is increased, a crossover occurs from interstitial motion in narrow easy-flow winding channels with typical avalanche sizes, to pin-to-pin motion in broad channels, characterized by a very broad distribution of sizes. Our results are consistent with recent experiments.Comment: 4 pages, Latex, 4 figures included. Movies available at http://www-personal.engin.umich.edu/~nor