Related papers: A statistical physics perspective on criticality i…
The field of study of complex systems considers that the dynamics of complex systems are founded on universal principles that may be used to describe a great variety of scientific and technological approaches of different types of natural,…
The enterprise of trying to explain different social and economic phenomena using concepts and ideas drawn from physics has a long history. Statistical mechanics, in particular, has been often seen as most likely to provide the means to…
We propose a new set of stylized facts quantifying the structure of financial markets. The key idea is to study the combined structure of both investment strategies and prices in order to open a qualitatively new level of understanding of…
Financial markets, being spectacular examples of complex systems, display rich correlation structures among price returns of different assets. The correlation structures change drastically, akin to phase transitions in physical phenomena,…
We critically review recent claims that financial crashes can be predicted using the idea of log-periodic oscillations or by other methods inspired by the physics of critical phenomena. In particular, the October 1997 `correction' does not…
The financial market is a complex dynamical system composed of a large variety of intricate relationships between several entities, such as banks, corporations and institutions. At the heart of the system lies the stock exchange mechanism,…
The latest financial crisis has painfully revealed the dangers arising from a globally interconnected financial system. Conventional approaches based on the notion of the existence of equilibrium and those which rely on statistical…
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…
I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect…
We propose that the minimal requirements for a model of stock market price fluctuations should comprise time asymmetry, robustness with respect to connectivity between agents, ``bounded rationality'' and a probabilistic description. We also…
A growing body of studies on systemic risk in financial markets has emphasized the key importance of taking into consideration the complex interconnections among financial institutions. Much effort has been put in modeling the contagion…
The concept of multifractality offers a powerful formal tool to filter out multitude of the most relevant characteristics of complex time series. The related studies thus far presented in the scientific literature typically limit themselves…
There is mounting empirical evidence that many communities of living organisms display key features which closely resemble those of physical systems at criticality. We here introduce a minimal model framework for the dynamics of a community…
The market efficiency hypothesis has been proposed to explain the behavior of time series of stock markets. The Black-Scholes model (B-S) for example, is based on the assumption that markets are efficient. As a consequence, it is…
This paper discusses serious drawbacks of existing knowledge in macroeconomics and finance in explaining and predicting economic and financial phenomena. Complexity science is proposed as an alternative approach to be used in order to…
Many studies assume stock prices follow a random process known as geometric Brownian motion. Although approximately correct, this model fails to explain the frequent occurrence of extreme price movements, such as stock market crashes. Using…
We combine geometric data analysis and stochastic modeling to describe the collective dynamics of complex systems. As an example we apply this approach to financial data and focus on the non-stationarity of the market correlation structure.…
Critical states are sometimes identified experimentally through power-law statistics or universal scaling functions. We show here that such features naturally emerge from networks in self-sustained irregular regimes away from criticality.…
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…
Prediction of events in financial markets is every investor's dream and, usually, wishful thinking. From a more general, economic and societal viewpoint, the identification of indicators for large events is highly desirable to assess…