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We present a financial market model, characterized by self-organized criticality, that is able to generate endogenously a realistic price dynamics and to reproduce well-known stylized facts. We consider a community of heterogeneous traders,…
Macroeconomic fluctuations and the narratives that shape them form a mutually reinforcing cycle: public discourse can spur behavioural changes leading to economic shifts, which then result in changes in the stories that propagate. We show…
Financial markets convert the incremental arrival of information into asset price changes. In a sandpile model grains of sand represent bits of data, and the size of an avalanche, governed by a scaling law, is linked to price volatility.…
We consider a market where many agents trade many different types of products with each other. We model development of collective modes in this market, and quantify these by fluctuations that scale with time with a Hurst exponent of about…
By investigating nonfungible tokens (NFTs), we provide the first systematic study of retail investor behavior through asset bubbles. Given that NFTs are recorded in public blockchains, we are able to track investor behavior over time,…
We present empirical evidence on the relationship between demand shocks and price changes, conditional on returns to scale. We find that in industries with decreasing returns to scale, demand increases (which raise costs) correspond to…
Universal features in stock markets and their derivative markets are studied by means of probability distributions in internal rates of return on buy and sell transaction pairs. Unlike the stylized facts in log normalized returns, the…
Diversity is a fundamental feature of ecosystems, even when the concept of ecosystem is extended to sociology or economics. Diversity can be intended as the count of different items, animals, or, more generally, interactions. There are two…
We study the behavior of simple models for financial markets with widely spread frequency either in the trading activity of agents or in the occurrence of basic events. The generic picture of a phase transition between information efficient…
Many complex systems exhibit extreme events far more often than expected for a normal distribution. This work examines how self-similar bursts of activity across several orders of magnitude can emerge from first principles in systems that…
We describe a simple model for speculative trading based on adaptive behavior of economic agents.The adaptive behavior is expressed through a feedback mechanism for changing agents' stock-to-bond ratios, depending on the past performance of…
Amorphous solids yield in strain-controlled protocols at a critical value of the strain. For larger strains the stress and energy display a generic complex serrated signal with elastic segments punctuated by sharp energy and stress plastic…
We present a macro-finance model with innovation and knowledge spillover. Skilled agents engage in R&D activities (establish firms) or work in the knowledge-intensive sector. Unskilled agents work in the traditional sector. Knowledge…
We construct a statistical indicator for the detection of short-term asset price bubbles based on the information content of bid and ask market quotes for plain vanilla put and call options. Our construction makes use of the martingale…
A characteristic feature of complex systems in general is a tight coupling between their constituent parts. In complex socio-economic systems this kind of behavior leads to self-organization, which may be both desirable (e.g. social…
Building on a prominent agent-based model, we present a new structural stochastic volatility asset pricing model of fundamentalists vs. chartists where the prices are determined based on excess demand. Specifically, this allows for…
Crashes have fascinated and baffled many canny observers of financial markets. In the strict orthodoxy of the efficient market theory, crashes must be due to sudden changes of the fundamental valuation of assets. However, detailed empirical…
We present an agent based model of a single asset financial market that is capable of replicating several non-trivial statistical properties observed in real financial markets, generically referred to as stylized facts. While previous…
There are two possible ways of interpreting the seemingly stochastic nature of financial markets: the Efficient Market Hypothesis (EMH) and a set of stylized facts that drive the behavior of the markets. We show evidence for some of the…
Proving the existence of speculative financial bubbles even a posteriori has proven exceedingly difficult so anticipating a speculative bubble ex ante would at first seem an impossible task. Still as illustrated by the recent turmoil in…