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The emergence and evolution of real-world systems have been extensively studied in the last few years. However, equally important phenomena are related to the dynamics of systems' collapse, which has been less explored, especially when they…
Methods for detecting structural changes, or change points, in time series data are widely used in many fields of science and engineering. This chapter sketches some basic methods for the analysis of structural changes in time series data.…
Information theory provides ideas for conceptualising information and measuring relationships between objects. It has found wide application in the sciences, but economics and finance have made surprisingly little use of it. We show that…
The financial crisis clearly illustrated the importance of characterizing the level of 'systemic' risk associated with an entire credit network, rather than with single institutions. However, the interplay between financial distress and…
Recent developments have created the ability to quantify information flow among components that interact in a dynamical system, and have led to significant advances in characterizing the dependence between the variables involved. In…
The recent financial crisis has stressed the need to understand financial systems as networks of interdependent countries, where cross-border financial linkages play the fundamental role. It has also been emphasized that the relevance of…
The cross-correlation matrix of daily returns of stock market indices in a diverse set of 37 countries worldwide was analyzed. Comparison of the spectrum of this matrix with predictions of random matrix theory provides an empirical evidence…
The failure of key financial institutions may accelerate risk contagion due to their interconnections within the system. In this paper, we propose a robust portfolio strategy to mitigate systemic risks during extreme events. We use the…
We study the cross-correlations in stock price changes between the S&P 500 companies by introducing a weighted random graph, where all vertices (companies) are fully connected, and each edge is weighted. The weight assigned to each edge is…
Stock price change in financial market occurs through transactions in analogy with diffusion in stochastic physical systems. The analysis of price changes in real markets shows that long-range correlations of price fluctuations largely…
The dynamics of the equal-time cross-correlation matrix of multivariate financial time series is explored by examination of the eigenvalue spectrum over sliding time windows. Empirical results for the S&P 500 and the Dow Jones Euro Stoxx 50…
Complex systems are often characterized by the interplay of multiple interconnected dynamical processes operating across a range of temporal scales. This phenomenon is widespread in both biological and artificial scenarios, making it…
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 order to understand the origin of stock price jumps, we cross-correlate high-frequency time series of stock returns with different news feeds. We find that neither idiosyncratic news nor market wide news can explain the frequency and…
Modelling accurately financial price variations is an essential step underlying portfolio allocation optimization, derivative pricing and hedging, fund management and trading. The observed complex price fluctuations guide and constraint our…
Fat tails in financial time series and increase of stocks cross-correlations in high volatility periods are puzzling facts that ask for new paradigms. Both points are of key importance in fundamental research as well as in Risk Management…
The scaling properties of the time series of asset prices and trading volumes of stock markets are analysed. It is shown that similarly to the asset prices, the trading volume data obey multi-scaling length-distribution of low-variability…
We find a nonlinear dependence between an indicator of the degree of multiscaling of log-price time series of a stock and the average correlation of the stock with respect to the other stocks traded in the same market. This result is a…
In the current era of worldwide stock market interdependencies, the global financial village has become increasingly vulnerable to systemic collapse. The recent global financial crisis has highlighted the necessity of understanding and…
A well-interpretable measure of information has been recently proposed based on a partition obtained by intersecting a random sequence with its moving average. The partition yields disjoint sets of the sequence, which are then ranked…