Related papers: A Peer-based Model of Fat-tailed Outcomes

Financial markets display scale-free behavior in many different aspects. The power-law behavior of part of the distribution of individual wealth has been recognized by Pareto as early as the nineteenth century. Heavy-tailed and scale-free…

We consider a class of multiplicative processes which, added with stochastic reset events, give origin to stationary distributions with power-law tails -- ubiquitous in the statistics of social, economic, and ecological systems. Our main…

(The third edition corrects minor typos and adds 3 chapters synthesized from published papers plus an appendix on maximum entropy distributions.) The monograph investigates the misapplication of conventional statistical techniques to fat…

This article describes mathematical methods for estimating the top-tail of the wealth distribution and therefrom the share of total wealth that the richest $p$ percent hold, which is an intuitive measure of inequality. As the data base for…

The task for a general and useful classification of the tail behaviors of probability distributions still has no satisfactory solution. Due to lack of information outside the range of the data the tails of the distribution should be…

We propose a model for stochastic formation of opinion clusters, modelled by an evolving network, and herd behaviour to account for the observed fat-tail distribution in returns of financial-price data. The only parameter of the model is h,…

Fat tails in financial time series and increase of stocks cross-correlations in high volatility periods are puzzling facts that ask for new paradigms. Both points are of key importance in fundamental research as well as in Risk Management…

In this paper, we introduce reduced-bias estimators for the estimation of the tail index of a Pareto-type distribution. This is achieved through the use of a regularised weighted least squares with an exponential regression model for…

We show, by studying in detail the market prices of options on liquid markets, that the market has empirically corrected the simple, but inadequate Black-Scholes formula to account for two important statistical features of asset…

The mutual fund industry manages about a quarter of the assets in the U.S. stock market and thus plays an important role in the U.S. economy. The question of how much control is concentrated in the hands of the largest players is best…

Implementing a set of microeconomic criteria, we develop price dynamics equations using a function of demand/supply with key symmetry properties. The function of demand/supply can be linear or nonlinear. The type of function determines the…

What do binary (or probabilistic) forecasting abilities have to do with overall performance? We map the difference between (univariate) binary predictions, bets and "beliefs" (expressed as a specific "event" will happen/will not happen) and…

There is given a method for estimation of a probability distribution tail in terms of characteristic function. Key words: characteristic function; tail of a distribution.

Since the turn of the century, there has been increased interest in the application of heavy-tailed distributions, particularly stable distributions, to problems in physics and finance. Although, the tails of stable distributions provide a…

An exact solution is presented to a model that mimics the crowding effect in financial markets which arises when groups of agents share information. We show that the size distribution of groups of agents has a power law tail with an…

In this paper we present a novel approach to the determination of fat tails in financial data by studying the information contained in the limit order book. In an order-driven market buyers and sellers may submit limit orders, which are…

This paper introduces a flexible framework for the estimation of the conditional tail index of heavy tailed distributions. In this framework, the tail index is computed from an auxiliary linear regression model that facilitates estimation…

The aim of the paper is to show that the presence of one possible type of outliers is not connected to that of heavy tails of the distribution. In contrary, typical situation for outliers appearance is the case of compact supported…

Power-law tails are ubiquitous in income distributions and in the energy distributions of diluted relativistic gases. We analyze the conceptual link between these two cases. In economic interactions fat tails arise because the richest…

Accurate forecasting of volatility and return quantiles is essential for evaluating financial tail risks such as value-at-risk and expected shortfall. This study proposes an extension of the traditional stochastic volatility model, termed…