Predicting Discontinuity in the Decision to Allocate Funds to Credit  
Memes with a Fokker-Planck Equation Based Model

by Purica, Ionut
Published in Romanian Journal of Economic Forecasting
, 2010, volume 13 issue 2, 295-307

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The model is one theoretical approach within a broader research program that could verify the nonlinear conjectures made to quantify and predict potential discontinuous behaviour. In this case, the crisis behaviour associated with financial funds reallocation among various credit instruments, described as memes with the sense of Dawkins, is shown to be of discontinuous nature stemming from a logistic penetration into the behaviour niche. A Fokker-Planck equation description results in a stationary solution having a bifurcation like the solution with evolution trajectories on a ‘cusp’ type catastrophe that may describe discontinuous decision behaviour.

Keywords: nonlinear models, decision, financial crisis
JEL Classification:
C3, C61, C62, D7, D87