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?

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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