Navigation Links
Exchange rate behaves like particles in a molecular fluid
Date:3/13/2014

When scientists observe minute particles like nanoparticles or bacteria in fluid under a microscope, they don't see a motionless image. What they do see are particles making the tiniest irregular twitches not unlike the nervous ups-and-downs of market prices and exchange rates. These two forms of random twitching microparticles in fluid and price developments on the financial market are not just similar at first sight as a Japanese-Swiss team has now demonstrated. The underlying mechanism is the same too.

Brownian motion, the name given by scientists to the microtwitching of particles in fluid, results from the impact of the universal thermal agitation of the individual molecules in the fluid. The renowned French mathematician Louis Bachelier observed back at the beginning of the 20th century that there were parallels between this random walk behavior and exchange rates. However, it is only now that Didier Sornette, Professor of Entrepreneurial Risks at ETH Zurich together with colleagues from Japan, has been able to demonstrate exact correlations between the two. The scientists have published their work in the reputed journal "Physical Review Letters".

Stock exchange meets Einstein's theorem

"Microparticles are surrounded and moved around by the molecules in the fluid. Similarly, the price at which securities or currencies are traded on a financial market should not be examined in isolation either", explains Sornette. It is far more the case that this price is embedded at all times in a larger whole, in the total sum of buying and selling orders of stockbroker's clients. When the number of these orders is far higher than that of the actual transactions, many bids won't lead to any transactions. This is the case, for instance, when an interested party is only willing to pay a relatively low price for a security but no holder is willing to sell for such a low price. Or when someone wants to sell a security for a relatively high price but can't find a buyer.

Exchange rates and bids influence each other spurred on by the ongoing efforts of all market players to make a profit by exploiting the differences in the prices. This means that the order book of stockbrokers is in constant motion. "This dynamic behaviour of all orders is comparable to the physical behaviour and influence of fluids on a Brownian particle, in the sense that the dynamics of the order book influences the observed transaction price in a precise way ", says Sornette.

The scientists checked their theory against available market data. To this end, they used the data of a global brokering company on the dollar-yen exchange rate. They were, for instance, able to demonstrate that the totality of orders for the buying and selling of the two currencies even met one of the most important theorems of statistical physics, the fluctuation-dissipation theorem that was developed by Albert Einstein in 1905, and still is a very active domain of research for its many applications.


'/>"/>

Contact: Didier Sornette
dsornette@ethz.ch
41-446-328-917
ETH Zurich
Source:Eurekalert

Related biology news :

1. BGI and Aspera collaborate on high-speed data exchange to advance genome research
2. New study demonstrates the role of urban greenery in CO2 exchange
3. WALTHAM® demonstrates commitment to scientific dialogue and exchange at international human animal interaction conference
4. Multiple sclerosis immune exchange between brain and blood is uncovered
5. Are silver nanoparticles harmful?
6. Nature: Video reveals wave character of particles
7. Hybrid copper-gold nanoparticles convert CO2
8. NIST/UMass study finds evidence nanoparticles may increase plant DNA damage
9. Canadian girl, 16, invents disease-fighting, anti-aging compound using tree particles
10. From pomegranate peel to nanoparticles
11. Palladium-gold nanoparticles clean TCE a billion times faster than iron filings
Post Your Comments:
*Name:
*Comment:
*Email:
(Date:4/4/2017)... NEW YORK , April 4, 2017   ... solutions, today announced that the United States Patent and ... The patent broadly covers the linking of an iris ... the same transaction) and represents the company,s 45 th ... our latest patent is very timely given the multi-modal ...
(Date:3/30/2017)... -- On April 6-7, 2017, Sequencing.com will host the world,s ... at Microsoft,s headquarters in Redmond, Washington ... health and wellness apps that provide a unique, personalized ... is the first hackathon for personal genomics and the ... the genomics, tech and health industries are sending teams ...
(Date:3/30/2017)... -- Trends, opportunities and forecast in this market to ... AFIS, iris recognition, facial recognition, hand geometry, vein recognition, ... industry (government and law enforcement, commercial and retail, health ... and by region ( North America , ... , and the Rest of the World) ...
Breaking Biology News(10 mins):
(Date:7/17/2017)... Ca (PRWEB) , ... July 17, 2017 , ... ... and are characterized by a wide range of overlapping clinical features. The advancement ... discovery in the field of NDD research and testing. , However, designing ...
(Date:7/17/2017)... ... July 17, 2017 , ... Co-Diagnostics, Inc. (NASDAQ: CODX) (“Co-Diagnostics” ... to manufacture and sell reagents used for diagnostic tests, has completed its initial ... Sandy, Utah, Co-Diagnostics’ intellectual property and technologies are protected by five granted or ...
(Date:7/16/2017)... ... July 16, 2017 , ... OHAUS Corporation, a ... launch of its new line of Rocking and Waving Shakers today. , Five ... (both analog and digital) for laboratory applications in a variety of environmental conditions. ...
(Date:7/15/2017)... (PRWEB) , ... July 15, 2017 , ... Cuvette ... 5 years. During this time, the people at FFS have learned that their ... customers, engineers at FFS are able to launch new products to meet the changing ...
Breaking Biology Technology: