Related papers: Financial bubbles: mechanisms and diagnostics
The drift burst hypothesis postulates the existence of short-lived locally explosive trends in the price paths of financial assets. The recent U.S. equity and treasury flash crashes can be viewed as two high-profile manifestations of such…
We present a synthesis of all the available empirical evidence in the light of recent theoretical developments for the existence of characteristic log-periodic signatures of growing bubbles in a variety of markets including 8 unrelated…
On 2 November 2009, the Financial Bubble Experiment was launched within the Financial Crisis Observatory (FCO) at ETH Zurich (\url{http://www.er.ethz.ch/fco/}). In that initial report, we diagnosed and announced three bubbles on three…
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…
House price increases have been steady over much of the last 40 years, but there have been occasional declines, most notably in the recent housing bust that started around 2007, on the heels of the preceding housing bubble. We introduce a…
Systemic risk is a rapidly developing area of research. Classical financial models often do not adequately reflect the phenomena of bubbles, crises, and transitions between them during credit cycles. To study very improbable events,…
Throughout history, many countries have repeatedly experienced large swings in asset prices, which are usually accompanied by large fluctuations in macroeconomic activity. One of the characteristics of the period before major economic…
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…
Recurrent boom-and-bust cycles are a salient feature of economic and financial history. Cycles found in the data are stochastic, often highly persistent, and span substantial fractions of the sample size. We refer to such cycles as "long".…
Log-periodic oscillations have been used to predict price trends and crashes on financial markets. So far two types of log-periodic oscillations have been associated with the real markets. The first type are oscillations which accompany a…
Keeping a basic tenet of economic theory, rational expectations, we model the nonlinear positive feedback between agents in the stock market as an interplay between nonlinearity and multiplicative noise. The derived hyperbolic stochastic…
In Maslov (2003), a two level model of the occurrence of financial pyramid (bubbles) has been considered. We also considered the mathematical analogy of this model to Bose condensation. In the present paper, we explain why Ponzi schemes and…
The bubble is a controversial and important issue. Many methods which based on the rational expectation have been proposed to detect the bubble. However, for some developing countries, epically China, the asset markets are so young that for…
The bitcoin price has surged in recent years and it has also exhibited phases of rapid decay. In this paper we address the question to what extent this novel cryptocurrency market can be viewed as a classic or semi-efficient market. Novel…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
A microscopic model of financial markets is considered, consisting of many interacting agents (spins) with global coupling and discrete-time thermal bath dynamics, similar to random Ising systems. The interactions between agents change…
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 two phase behavior in financial markets actually means the bifurcation phenomenon, which represents the change of the conditional probability from an unimodal to a bimodal distribution. In this paper, the bifurcation phenomenon in…
The problem of investing into a cryptocurrency market requires good understanding of the processes that regulate the price of the currency. In this paper we offer a view of a cryptocurrency market as an environment for realization of a…
We consider the problem of governing systemic risk in a banking system model. The banking system model consists in an initial value problem for a system of stochastic differential equations whose dependent variables are the log-monetary…