Related papers: Financial instability from local market measures
We analyze the stability of financial investment networks, where financial institutions hold overlapping portfolios of assets. We consider the effect of portfolio diversification and heterogeneous investments using a random matrix dynamical…
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
The relationship between price volatilty and a market extremum is examined using a fundamental economics model of supply and demand. By examining randomness through a microeconomic setting, we obtain the implications of randomness in the…
We contrast Arbitrage Pricing Theory (APT), the theoretical basis for the development of financial instruments, with a dynamical picture of an interacting market, in a simple setting. The proliferation of financial instruments apparently…
This paper investigates the common intuition suggesting that during crises the shape of the financial market clearly differentiates from that of random walk processes. In this sense, it challenges the analysis of the nature of financial…
Many financial and economic variables, including financial returns, exhibit nonlinear dependence, heterogeneity and heavy-tailedness. These properties may make problematic the analysis of (non-)efficiency and volatility clustering in…
We introduce an event based framework of directional changes and overshoots to map continuous financial data into the so-called Intrinsic Network - a state based discretisation of intrinsically dissected time series. Defining a method for…
Decisions taken in our everyday lives are based on a wide variety of information so it is generally very difficult to assess what are the strategies that guide us. Stock market therefore provides a rich environment to study how people take…
Financial global crisis has devastating impacts to economies since early XX century and continues to impose increasing collateral damages for governments, enterprises, and society in general. Up to now, all efforts to obtain efficient…
Financial markets typically exhibit dynamically complex properties as they undergo continuous interactions with economic and environmental factors. The Efficient Market Hypothesis indicates a rich difference in the structural complexity of…
This paper develops new mathematical techniques to identify temporal shifts among a collection of US equities partitioned into a new and more detailed set of market sectors. Although conceptually related, our three analyses reveal distinct…
Based on a criterium of mathematical simplicity and consistency with empirical market data, a stochastic volatility model has been obtained with the volatility process driven by fractional noise. Depending on whether the stochasticity…
We study a dynamical model of interconnected firms which allows for certain market imperfections and frictions, restricted here to be myopic price forecasts and slow adjustment of production. Whereas the standard rational equilibrium is…
This paper investigates the structural dynamics of stock market volatility through the Financial Chaos Index, a tensor- and eigenvalue-based measure designed to capture realized volatility via mutual fluctuations among asset prices.…
Market-based coordination of demand side assets has gained great interests in recent years. In spite of its efficiency, there is a risk that the interaction between the dynamic assets through the price signal could result in an unstable…
Empirical diagnosis of stability has received considerable attention, mostly focused on variance metrics for early warning signals of abrupt system change. Despite this, the theoretical foundation and application has been limited to…
We investigate the possibility of statistical evaluation of the market completeness for discrete time stock market models. It is known that the market completeness is not a robust property: small random deviations of the coefficients…
We analyze the linear response of a market network to shocks based on the bipartite market model we introduced in an earlier paper, which we claimed to be able to identify the time-line of the 2009-2011 Eurozone crisis correctly. We show…
We consider the randomness of market trade as the origin of price and return stochasticity. We look at time series of trade values and volumes as random variables during the averaging interval {\Delta} and describe the dependences of…
We explore a stochastic model that enables capturing external influences in two specific ways. The model allows for the expression of uncertainty in the parametrisation of the stochastic dynamics and incorporates patterns to account for…