Related papers: Financial instability from local market measures
The investor is interested in the expected return and he is also concerned about the risk and the uncertainty assumed by the investment. One of the most popular concepts used to measure the risk and the uncertainty is the variance and/or…
The dual crises of the sub-prime mortgage crisis and the global financial crisis has prompted a call for explanations of non-equilibrium market dynamics. Recently a promising approach has been the use of agent based models (ABMs) to…
In the past decades, advanced probabilistic methods have had significant impact on the field of finance, both in academia and in the financial industry. Conversely, financial questions have stimulated new research directions in probability.…
What is the demand elasticity of statistical arbitrageurs that invest according to the advice of modern cross-sectional asset pricing models? Thirteen models from the literature exhibit strikingly inelastic demand, in contrast to classical…
Financial markets have been extensively studied as highly complex evolving systems. In this paper, we quantify financial price fluctuations through a coupled dynamical system composed of phase oscillators. We find a Financial Coherence and…
The scaling properties encompass in a simple analysis many of the volatility characteristics of financial markets. That is why we use them to probe the different degree of markets development. We empirically study the scaling properties of…
Financial and economic history is strewn with bubbles and crashes, booms and busts, crises and upheavals of all sorts. Understanding the origin of these events is arguably one of the most important problems in economic theory. In this…
Financial instability has become a significant issue in today's society. While research typically focuses on financial aspects, there is a tendency to overlook time-related aspects of unstable work schedules. The inability to rely on…
Using frequency distributions of daily closing price time series of several financial market indexes, we investigate whether the bias away from an equiprobable sequence distribution found in the data, predicted by algorithmic information…
We present and study a Minority Game based model of a financial market where adaptive agents -- the speculators -- interact with deterministic agents -- called producers. Speculators trade only if they detect predictable patterns which…
We address microscopic, agent based, and macroscopic, stochastic, modeling of the financial markets combining it with the exogenous noise. The interplay between the endogenous dynamics of agents and the exogenous noise is the primary…
We propose a general interpretation for long-range correlation effects in the activity and volatility of financial markets. This interpretation is based on the fact that the choice between `active' and `inactive' strategies is subordinated…
We present a mathematical model of a market with $m$ shares traded across $n$ investor groups, each one with similar motivations and trading strategies. The market of each asset consists of a fixed amount of cash and shares (no additions…
We study a market model in which the volatility of the stock may jump at a random time from a fixed value to another fixed value. This model was already described in the literature. We present a new approach to the problem, based on partial…
The financial market is nonpredictable, as according to the Bachelier, the mathematical expectation of the speculator is zero. Nevertheless, we observe in the price fluctuations the two distinct scales, short and long time. Behaviour of a…
What is the dominating mechanism of the price dynamics in financial systems is of great interest to scientists. The problem whether and how volatilities affect the price movement draws much attention. Although many efforts have been made,…
We review the nature of some well-known phenomena such as volatility smiles, convexity adjustments and parallel derivative markets. We propose that the market is incomplete and postulate the existence of intrinsic risks in every contingent…
Financial crises are a recurrent phenomenon with important effects on the real economy. The financial system is inherently fragile and it is therefore of great importance to be able to measure and characterize its systemic stability.…
We consider different levels of complexity which are observed in the empirical investigation of financial time series. We discuss recent empirical and theoretical work showing that statistical properties of financial time series are rather…
Price fluctuations in financial markets can be characterized by L\'evy's stable distribution, which is supported by the generalized central limit system. When the stable parameters were estimated from four different stock markets in long…