Understanding price and wealth dynamics with the help of asset flow models.

Located at the intersection of econophysics and behavioral economics, asset flow model uses the tools of dynamical systems theory to explain phenomena observed in market dynamics. It describes trading process as an exchange of assets and cash between market participants, and determines the price by balancing the supply and demand. I will outline the basic construction of the model and some of its implications for the mechanisms of flash crashes, market bubbles, and transfer of wealth.