Related papers: Trust! Why it Has Been Lost and How to Regain It
Volatility is the canonical measure of financial risk, a role largely inherited from Modern Portfolio Theory. Yet, its universality rests on restrictive efficiency assumptions that render volatility, at best, an incomplete proxy for true…
Trustworthiness and trust are basic factors in common societies that allow us to interact and enjoy being in crowds without fear. As robotic devices start percolating into our daily lives they must behave as fully trustworthy objects, such…
Multifractality is ubiquitously observed in complex natural and socioeconomic systems. Multifractal analysis provides powerful tools to understand the complex nonlinear nature of time series in diverse fields. Inspired by its striking…
With negative growth in real production in many countries and debt levels which become an increasing burden on developed societies, the calls for a change in economic policy and even the monetary system become louder and increasingly…
A lot of business and research effort currently deals with the so called decentralised ledger technology blockchain. Putting it to use carries the tempting promise to make the intermediaries of social interactions superfluous and…
This survey treats the problem of ruin in a risk model when assets earn investment income. In addition to a general presentation of the problem, topics covered are a presentation of the relevant integro-differential equations, exact and…
In modern internet-scale computing, interaction between a large number of parties that are not known a-priori is predominant, with each party functioning both as a provider and consumer of services and information. In such an environment,…
We discuss - in what is intended to be a pedagogical fashion - a criterion, which is a lower bound on a certain ratio, for when a stock (or a similar instrument) is not a good investment in the long term, which can happen even if the…
We show that the emergence of systemic risk in complex systems can be understood from the evolution of functional networks representing interactions inferred from fluctuation correlations between macroscopic observables. Specifically, we…
The dynamic network of relationships among corporations underlies cascading economic failures including the current economic crisis, and can be inferred from correlations in market value fluctuations. We analyze the time dependence of the…
Contagion is an extremely important topic in finance. Contagion is at the core of most major financial crises, in particular the 2008 financial crisis. Although various approaches to quantifying contagion have been proposed, many of them…
This paper examines the possibility of using derivative-implied risk premia to explain stock returns. The rapid development of derivative markets has led to the possibility of trading various kinds of risks, such as credit and interest rate…
The integration and innovation of finance and technology have gradually transformed the financial system into a complex one. Analyses of the causesd of abnormal fluctuations in the financial market to extract early warning indicators…
We present a self-consistent model for explosive financial bubbles, which combines a mean-reverting volatility process and a stochastic conditional return which reflects nonlinear positive feedbacks and continuous updates of the investors'…
Recovering from crises, such as hurricanes or wildfires, is a complex process that can take weeks, months, or even decades to overcome. Crises have both acute (immediate) and chronic (long-term) effects on communities. Crisis informatics…
I argue that the current financial crisis highlights the crucial need of a change of mindset in economics and financial engineering, that should move away from dogmatic axioms and focus more on data, orders of magnitudes, and plausible,…
As the decade turns, we reflect on nearly thirty years of successful manipulation of the world's public equity markets. This reflection highlights a few of the key enabling ingredients and lessons learned along the way. A quantitative…
We investigate financial market correlations using random matrix theory and principal component analysis. We use random matrix theory to demonstrate that correlation matrices of asset price changes contain structure that is incompatible…
The purpose of the present essay is to suggest a possible model to describe the worldwide healthcare crisis, where diseases that have been considered to be eradicated or under our control are re-emerging today.
For the past two decades investors have observed long memory and highly correlated behavior of asset classes that does not fit into the framework of Modern Portfolio Theory. Custom correlation and standard deviation estimators consider…