Related papers: Hierarchical causality in financial economics
In this paper we explore the concept of hierarchy as a quantifiable descriptor of ordered structures, departing from the definition of three conditions to be satisfied for a hierarchical structure: {\em order}, {\em predictability} and {\em…
We model a network economy with three sectors: downstream firms, upstream firms, and banks. Agents are linked by productive and credit relationships so that the behavior of one agent influences the behavior of the others through network…
We study the emergence of instabilities in a stylized model of a financial market, when different market actors calculate prices according to different (local) market measures. We derive typical properties for ensembles of large random…
A new chaotic financial system is proposed by considering ethics involvement in a four-dimensional financial system with market confidence. A five-dimensional conformable derivative financial system is presented by introducing conformable…
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…
The econophysics approach to socio-economic systems is based on the assumption of their complexity. Such assumption inevitably lead to another assumption, namely that underlying interconnections within socio-economic systems, particularly…
Economies and societal structures in general are complex stochastic systems which may not lend themselves well to algebraic analysis. An addition of subjective value criteria to the mechanics of interacting agents will further complicate…
Identifying the causal structure of systems with multiple dynamic elements is critical to several scientific disciplines. The conventional approach is to conduct statistical tests of causality, for example with Granger Causality, between…
Prices of commodities or assets produce what is called time-series. Different kinds of financial time-series have been recorded and studied for decades. Nowadays, all transactions on a financial market are recorded, leading to a huge amount…
We assume the market price to diffuse in a hierarchical comb of barriers, the heights of which represent the importance of new information entering the market. We find fat tails with the desired exponent for the price change distribution,…
Provenance, or information about the sources, derivation, custody or history of data, has been studied recently in a number of contexts, including databases, scientific workflows and the Semantic Web. Many provenance mechanisms have been…
Causal inference is a study of causal relationships between events and the statistical study of inferring these relationships through interventions and other statistical techniques. Causal reasoning is any line of work toward determining…
According to behavioral finance, stock market returns are influenced by emotional, social and psychological factors. Several recent works support this theory by providing evidence of correlation between stock market prices and collective…
The hierarchical topology is a common property of many complex systems. Here we introduce a simple but generic model of hierarchy growth from the bottom to the top. Therein, two dynamical processes are accounted for: agent's promotions to…
Mounting empirical evidence suggests that the observed extreme prices within a trading period can provide valuable information about the volatility of the process within that period. In this paper we define a class of stochastic volatility…
A Value-at-Risk based model is proposed to compute the adequate equity capital necessary to cover potential losses due to operational risks, such as human and system process failures, in banking organizations. Exploring the analogy to a…
We attempt to explain stock market dynamics in terms of the interaction among three variables: market price, investor opinion and information flow. We propose a framework for such interaction and apply it to build a model of stock market…
We introduce an agent-based model, in which agents set their prices to maximize profit. At steady state the market self-organizes into three groups: excess producers, consumers and balanced agents, with prices determined by their own…
Evaluation of systemic risk in networks of financial institutions in general requires information of inter-institution financial exposures. In the framework of Debt Rank algorithm, we introduce an approximate method of systemic risk…
In classification problems, especially those that categorize data into a large number of classes, the classes often naturally follow a hierarchical structure. That is, some classes are likely to share similar structures and features. Those…