Mapping markets to the statistical mechanics: the derivatives act against the self-regulation of stock market

TL;DR

This paper applies statistical physics models to financial markets, suggesting that the presence of derivatives prevents the stock market from self-regulating, unlike markets without derivatives.

Contribution

It introduces a novel approach by mapping stock markets with derivatives to statistical physics models, highlighting their impact on market self-regulation.

Findings

Derivatives hinder the self-regulation of stock markets.

Statistical physics models can effectively analyze market dynamics.

Markets with derivatives behave differently from pure stock markets.

Abstract

Mapping the economy to the some statistical physics models we get strong indications that, in contrary to the pure stock market, the stock market with derivatives could not self-regulate.