Related papers: Estimating Tipping Points in Feedback-Driven Finan…
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 basis of arbitrage methods depends on the circulation of information within the framework of the financial market. Following the work of Modigliani and Miller, it has become a vital part of discussions related to the study of financial…
In order to figure out and to forecast the emergence phenomena of social systems, we propose several probabilistic models for the analysis of financial markets, especially around a crisis. We first attempt to visualize the collective…
We discuss the nonlinear phenomena of irreversible tipping for non-autonomous systems where time-varying inputs correspond to a smooth "parameter shift" from one asymptotic value to another. We express tipping in terms of pullback…
A simple quantitative example of a reflexive feedback process and the resulting price dynamics after an exogenous price shock to a financial network is presented. Furthermore, an outline of a theory that connects financial reflexivity,…
Opinions and beliefs determine the evolution of social systems. This is of particular interest in finance, as the increasing complexity of financial systems is coupled with information overload. Opinion formation, therefore, is not always…
Trust lies at the crux of most economic transactions, with credit markets being a notable example. Drawing on insights from the literature on coordination games and network growth, we develop a simple model to clarify how trust breaks down…
In this paper we analyze how market prices change in response to information processing among the market participants and how non-linear information dynamics drive market price movement. We analyze historical data of the SP 500 market for…
By combining (i) the economic theory of rational expectation bubbles, (ii) behavioral finance on imitation and herding of investors and traders and (iii) the mathematical and statistical physics of bifurcations and phase transitions, the…
We introduce the concept of "negative bubbles" as the mirror image of standard financial bubbles, in which positive feedback mechanisms may lead to transient accelerating price falls. To model these negative bubbles, we adapt the…
In many areas of industry and society, e.g., energy, healthcare, logistics, agents collect vast amounts of data that they deem proprietary. These data owners extract predictive information of varying quality and relevance from data…
A characteristic feature of complex systems in general is a tight coupling between their constituent parts. In complex socio-economic systems this kind of behavior leads to self-organization, which may be both desirable (e.g. social…
Tipping points are critical thresholds of parameters where tiny perturbations can lead to abrupt and large qualitative changes in the systems. Many real-world systems that exhibit tipping behavior can be represented as networks of…
In the aftermath of the financial crisis, the growing literature on financial networks has widely documented the predictive power of topological characteristics (e.g. degree centrality measures) to explain the systemic impact or systemic…
We propose two rational expectation models of transient financial bubbles with heterogeneous arbitrageurs and positive feedbacks leading to self-reinforcing transient stochastic faster-than-exponential price dynamics. As a result of the…
We discuss how minimal financial market models can be constructed by bridging the gap between two existing, but incomplete, market models: a model in which a population of virtual traders make decisions based on common global information…
We introduce a stochastic heterogeneous interacting-agent model for the short-time non-equilibrium evolution of excess demand and price in a stylized asset market. We consider a combination of social interaction within peer groups and…
Financial market is an example of complex system, which is characterized by a highly intricate organization and the emergence of collective behavior. In this paper, we quantify this emergent dynamics in the financial market by using…
We study the behavior of for-profit institutions that broadcast reputations to foster trust among market participants. We develop a theoretical model in which buyers and sellers are matched on a platform to engage in transactions involving…
Bilateral trade models the problem of facilitating trades between a seller and a buyer having private valuations for the item being sold. In the online version of the problem, the learner faces a new seller and buyer at each time step, and…