Statistical microeconomic modelling of asset prices: some perspectives from Islamic finance and economics
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The theory of commodity pricing is one of the foundations of economic theory and applications. A mathematical model is proposed, from first principles and based on the formalism of statistical physics, for describing the prices of commodities. Both spot and futures prices are analyzed. The calibration and predictions of the model, based on market data, provide strong evidence in support of the model. Consider the behavior of market prices. As can be seen from Figure 8.1, the price of silver and gold appear to have a random time evolution. Furthermore, the two prices seem to be positively correlated; in contrast, the price of gold and oil seem to be negatively correlated. Market data seems to indicate that commodity prices are stochastic variables, and it is this feature of market prices that leads to its statistical modelling. Statistical microeconomics takes the commodity prices as random stochastic processes, and in particular, aims to explain the auto- and cross-correlation of commodity prices ...
Statistical microeconomics , Asset prices , Islamic finance , Islamic economics
Baaquie, Belal E. and El Maghrebi, Nabil. (2020). Statistical microeconomic modelling of asset prices: some perspectives from Islamic finance and economics. In Nabil El Maghrebi, Tarik Akin, Abbas Mirakhor and Zamir Iqbal (Eds.), Handbook of analytical studies in Islamic finance and economics (pp. 193-216). Berlin: Walter de Gruyter.
Walter de Gruyter