Related papers: Reducing Financial Avalanches By Random Investment…
Uniform spherical beads were used to explore the behavior of a granular system near its critical angle of repose on a conical bead pile. We found two tuning parameters that could take the system to a critical point where a simple power-law…
Recent studies of cluster distribution in various ecosystems revealed Pareto statistics for the size of spatial colonies. These results were supported by cellular automata simulations that yield robust criticality for endogenous pattern…
Scale invariance, collective behaviours and structural reorganization are crucial for portfolio management (portfolio composition, hedging, alternative definition of risk, etc.). This lack of any characteristic scale and such elaborated…
In this paper, we apply tools from the random matrix theory (RMT) to estimates of correlations across volatility of various assets in the S&P 500. The volatility inputs are estimated by modeling price fluctuations as GARCH(1,1) process. The…
We construct a model of an exchange economy in which agents trade assets contingent on an observable signal, the probability of which depends on public opinion. The agents in our model are replaced occasionally and each person updates…
Interaction strategies for reward in competitive environments are significantly influenced by the nature and extent of available information. In financial markets, particularly foreign exchange (forex), traders operate independently with…
In this paper we study a simple model of a purely excitatory neural network that, by construction, operates at a critical point. This model allows us to consider various markers of criticality and illustrate how they should perform in a…
Hysteresis loops and the associated avalanche statistics of spin systems, such as the random-field Ising and Edwards-Anderson spin-glass models, have been extensively studied. A particular focus has been on self-organized criticality,…
We characterize the distributions of size and duration of avalanches propagating in complex networks. By an avalanche we mean the sequence of events initiated by the externally stimulated `excitation' of a network node, which may, with some…
We consider a financial market in which traders potentially face restrictions in trading some of the available securities. Traders are heterogeneous with respect to their beliefs and risk profiles, and the market is assumed thin: traders…
Herding behavior has become a familiar phenomenon to investors, with potential dangers of both undervaluing and overvaluing assets, while also threatening market stability. This study contributes to the literature on herding behavior by…
We build an agent-based model to study how the interplay between low- and high-frequency trading affects asset price dynamics. Our main goal is to investigate whether high-frequency trading exacerbates market volatility and generates flash…
We present our competing shares financial market model and describe its behaviour by numerical simulation. We show that in the critical region the distribution avalanches of the market value as defined in this model has a power-law…
Different models to study the wealth distribution in an artificial society have considered a transactional dynamics as the driving force. Those models include a risk aversion factor, but also a finite probability of favoring the poorer…
We study simultaneous price drops of real stocks and show that for high drop thresholds they follow a power-law distribution. To reproduce these collective downturns, we propose a minimal self-organized model of cascade spreading based on a…
In this paper we explore the specific role of randomness in financial markets, inspired by the beneficial role of noise in many physical systems and in previous applications to complex socio- economic systems. After a short introduction, we…
This paper reviews recent attempts at modelling inequality of wealth as an emergent phenomenon of interacting-agent processes. We point out that recent models of wealth condensation which draw their inspiration from molecular dynamics have,…
The occurrence of aftershocks following a major financial crash manifests the critical dynamical response of financial markets. Aftershocks put additional stress on markets, with conceivable dramatic consequences. Such a phenomenon has been…
This paper studies stochastic mechanisms under which light-tailed latent price dynamics yield realized prices with power-law tails. The realized price is modeled as $P_T=e^{X_T}$, where $X$ is a Markov-modulated L\'evy process and $T$ is…
It is reported that financial news, especially financial events expressed in news, provide information to investors' long/short decisions and influence the movements of stock markets. Motivated by this, we leverage financial event streams…