Kinetic properties in inhomogeneous self-aware media

TL;DR

This paper introduces a new finance framework combining econophysics approaches to analyze market impact, big player behavior, and self-organization, emphasizing non-arbitrage conditions and the influence of large firms.

Contribution

It proposes a novel framework integrating multiple econophysics methods to better understand market dynamics and the role of big players in financial markets.

Findings

Market generally follows non-arbitrage conditions.

Big firms influence market behavior in specific situations.

Self-organization of small players can exploit arbitrage opportunities.

Abstract

The new framework for finance is proposed. This framework based on three known approaches in econophysics. Assumptions of the framework are the following: 1. For the majority of situations market follows non-arbitrage condition. 2. For the small number of situations market influenced by the actions of big firms. 3. If actions of big players lead to the arbitrage opportunity, small players could self-organize to take advantage of this opportunity. The framework is an attempt to combine approaches of Bouchaud, Gabaix, Sornette, Stanley and coauthors. Suggested framework is applied for the analysis of market impact models, behavior of big players, self-organization of market firm and volatility description.