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This paper analyzes nonlinearities in the international transmission of financial shocks originating in the US. To do so, we develop a flexible nonlinear multi-country model. Our framework is capable of producing asymmetries in the…
This paper offers a new class of models of the term structure of interest rates. We allow each instantaneous forward rate to be driven by a different stochastic shock, constrained in such a way as to keep the forward rate curve continuous.…
The recently proposed discrete scale invariance and its associated log-periodicity are an elaboration of the concept of scale invariance in which the system is scale invariant only under powers of specific values of the magnification…
We investigate the large-volatility dynamics in financial markets, based on the minute-to-minute and daily data of the Chinese Indices and German DAX. The dynamic relaxation both before and after large volatilities is characterized by a…
Twenty-two significant bubbles followed by large crashes or by severe corrections in the Argentinian, Brazilian, Chilean, Mexican, Peruvian, Venezuelan, Hong-Kong, Indonesian, Korean, Malaysian, Philippine and Thai stock markets indices are…
Communication is now a standard tool in the central bank's monetary policy toolkit. Theoretically, communication provides the central bank an opportunity to guide public expectations, and it has been shown empirically that central bank…
A simple quantum model explains the Levy-unstable distributions for individual stock returns observed by ref.[1]. The probability density function of the returns is written as the squared modulus of an amplitude. For short time intervals…
The observation of foreshocks preceding large earthquakes and the suggestion that foreshocks have specific properties that may be used to distinguish them from other earthquakes have raised the hope that large earthquakes may be…
Stock prices are observed to be random walks in time despite a strong, long term memory in the signs of trades (buys or sells). Lillo and Farmer have recently suggested that these correlations are compensated by opposite long ranged…
The elementary theory of aftershocks, being relatively simple mathematically, belongs to the basics of earthquake physics. The paper briefly outlines the concepts and ideas of the theory, provides equations for the relaxation of the source…
Can uncertainty about credit availability trigger a slowdown in real activity? This question is answered by using a novel method to identify shocks to uncertainty in access to credit. Time-variation in uncertainty about credit availability…
The goal of developing a firmer theoretical understanding of inhomogenous temporal processes -- in particular, the waiting times in some collective dynamical system -- is attracting significant interest among physicists. Quantifying the…
In this paper we explain the wild fluctuations of financial prices from the intrinsic amplifying feedback of speculative supply and demand. Formally, we show that an asset return follows a multiplicative random growth with exogenous input,…
What happens when the Supreme Court of the United States decides a case impacting one or more publicly-traded firms? While many have observed anecdotal evidence linking decisions or oral arguments to abnormal stock returns, few have…
The technique of Pad\'e Approximants, introduced in a previous work, is applied to extended recent data on the distribution of variations of interest rates compiled by the Federal Reserve System in the US. It is shown that new power laws…
The statistical properties of avalanches in a dissipative particulate system under slow shear are investigated using molecular dynamics simulations. It is found that the magnitude-frequency distribution obeys the Gutenberg-Richter law only…
We investigate the mechanisms behind the power-law distribution of stock returns using artificial market simulations. While traditional financial theory assumes Gaussian price fluctuations, empirical studies consistently show that the tails…
Prices in financial markets exhibit extreme jumps far more often than can be accounted for by external news. Further, magnitudes of price changes are correlated over long times. These so called stylized facts are quantified by scaling laws…
We present an analysis of the time behavior of the $S\&P500$ (Standard and Poors) New York stock exchange index before and after the October 1987 market crash and identify precursory patterns as well as aftershock signatures and…
We study, both analytically and numerically, an ARCH-like, multiscale model of volatility, which assumes that the volatility is governed by the observed past price changes on different time scales. With a power-law distribution of time…