The minimal model of financial complexity

Philip Z. Maymin

Research output: Contribution to journalArticlepeer-review


A representative investor generates realistic and complex security price paths by following this trading strategy: if, a few ticks ago, the market asset had two consecutive upticks or two consecutive downticks, then sell, and otherwise buy. This simple, unique, and robust model is the smallest possible deterministic model of financial complexity, and its generalization leads to complex variety. Compared to a random walk, the minimal model generates time series with fatter tails and more frequent crashes, thus more closely matching the real world. It does all this without any parameter fitting.

Original languageEnglish (US)
Pages (from-to)1371-1378
Number of pages8
JournalQuantitative Finance
Issue number9
StatePublished - Sep 2011


  • Agent based modelling
  • Artificial economy
  • Behavioural finance
  • Cellular automata
  • Chaos theory
  • Complexity in finance
  • Dynamic models
  • Dynamical systems

ASJC Scopus subject areas

  • General Economics, Econometrics and Finance
  • Finance


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