Previously we have discussed ant colony model [1, 2] (see Kirman’s agent based and stochastic model of ant colony), which is an interesting example of applying knowledge obtained from one field to another. Human (ex. trader in the financial markets) crowd behavior is ideologically quite similar to the behavior in ant colonies, thus the success and relevancy of the aforementioned model were to be expected. Though the key to success lies in the description of large number of entities.
Interestingly enough one can also create, and thus provide additional backing for the argument above, a successful model for human crowd behavior using classical models of statistical physics as an inspiration. In this text we will discuss agent based spin model of the financial markets proposed by Bornholdt [3, 4], which is based on widely known Ising model. Continue reading “Bornholdt’s heterogeneous agent based spin model for financial markets” »