Application of Thermodynamics Entropy Concept in Financial Markets

Sellamuthu Prabakaran

Producción: Capítulo del libro/informe/acta de congresoContribución a la conferenciarevisión exhaustiva

1 Cita (Scopus)


Entropy is a mathematically defined quantity that is generally used for characterizing the probability of outcomes in a system that is undergoing a process. It was originally introduced in thermodynamics by Rudolf Clausius (Philos Mag J Sci 40:122–127, 1870) to measure the ratio of transferred heat through a reversible process in an isolated system. In statistical mechanics the interpretation of entropy is the measure of uncertainty about the system that remains after observing its macroscopic properties (pressure, temperature, or volume). In this work, we attempt that the concept of entropy in thermodynamics be applied to financial markets. The main goal of this study is fourfold: (1) First we begin our approach through the concept of financial economics entropy. (2) Next we introduce the concept of entropy in economic systems. (3) Here we are exploring the interpretation of entropy in finance. (4) Then we extend the concept of entropy used in finance with standard economic utility theory by using of entropy and its maximization. (5) Finally, we construct the model of variance equilibrium under an entropy (financial) risk measure. And this paper ends with conclusion.

Idioma originalInglés
Título de la publicación alojadaAdvances in Panel Data Analysis in Applied Economic Research - 2017 International Conference on Applied Economics, ICOAE 2017
EditoresNicholas Tsounis, Aspasia Vlachvei
EditorialSpringer Science and Business Media B.V.
Número de páginas16
ISBN (versión impresa)9783319700540
EstadoPublicada - 2018
EventoInternational Conference on Applied Economics, ICOAE 2017 - Coventry, Reino Unido
Duración: 06 jul. 201708 jul. 2017

Serie de la publicación

NombreSpringer Proceedings in Business and Economics
ISSN (versión impresa)2198-7246
ISSN (versión digital)2198-7254


ConferenciaInternational Conference on Applied Economics, ICOAE 2017
País/TerritorioReino Unido


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