Agent based model of foreign exchange markets by using econophysics method and its application

Abstract

We introduce minimal agent based model of foreign exchange markets from the view point of econophysics. In order to reproduce major statistical properties of real market, we start from the simplest model and we add two important feedback effects to this simplest model; one is feedback effect of price change and the other is feedback effect of transaction intervals. As an application of this realistic model, we simulate the case of government intervention on exchange rate and discuss a relationship between a dealers' trend-follow effect and efficiency of the intervention.