Price, Volatility and the Second-Order Economic Theory

We introduce the new price probability measure, which entirely depends on measures of value and volume market trades. define nth statistical moment as ratio to all trades performed during an averaging time interval Δ. The set moments determines characteristic function its Fourier transform defines measure. volatility 1st 2nd prediction requires a description sums squares Δ we call it second-order economic theory. To develop that theory, numerical continuous risk ratings distribute agents by coordinates. Based distributions coordinates, media approximation describes collective perform under action their expectations. model mutual impact expectations derive equations describe evolution. illustrate benefits our approach, in linear perturbations mean price, square functions first second-degree trades’ disturbances.