Physics - Econophysics

Introduction

• Econophysics is an interdisciplinary science that studies the dynamic behavior of finance and economic markets.

• In order to solve the problems of economics and also to understand the dynamic behavior of the market, the econo-physicists develop applied theories.

• Econophysics, sometime, is also known as the physics of finance.

• It applies statistical mechanics for the economic analysis.

Econophysics Questions

• The econophysics questions include −

  • How to accurately measure and explain the significant properties of market dynamics?

  • How to stabilize the markets?

  • What are the different behaviors in different markets?

Tools of Econophysics

• The fundamental tools of econophysics are −

  • Probabilistic method

  • Statistical method

  • These two methods are borrowed from statistical physics.

• Other tools taken from Physics

  • Fluid dynamics

  • Classical mechanics

  • Quantum mechanics

Models of Econophysics

• Following are the major models those are used in Econophysics −

  • Percolation Model

  

  • Kinetic exchange models of markets

  • Chaotic models

  • Information theory

  • Random matrix theory

  • Diffusion theory