Related papers: Mini-Flash Crashes, Model Risk, and Optimal Execut…
For this special issue, the article aims at discussing a few econophysics problems studied so far rather successfully. The following "applications" in micro-econo-physics are considered : (i) financial crashes; it is emphasized that one can…
Topological data analysis has been acknowledged as one of the most successful mathematical data analytic methodologies in various fields including medicine, genetics, and image analysis. In this paper, we explore the potential of this…
We build an agent-based model to study how the interplay between low- and high-frequency trading affects asset price dynamics. Our main goal is to investigate whether high-frequency trading exacerbates market volatility and generates flash…
This paper provides robust, new evidence on the causal drivers of market troughs. We demonstrate that conclusions about these triggers are critically sensitive to model specification, moving beyond restrictive linear models with a flexible…
Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution…
We investigate and defend the possibility of causing a stock market crash via small manipulations of individual stock values that together realize an adversarial example to financial forecasting models, causing these models to make the…
Prices in financial markets exhibit extreme jumps far more often than can be accounted for by external news. Further, magnitudes of price changes are correlated over long times. These so called stylized facts are quantified by scaling laws…
Network effects are the added value derived solely from the popularity of a product in an economic market. Using agent-based models inspired by statistical physics, we propose a minimal theory of a competitive market for (nearly)…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
This paper proposes a simple and parsimonious discrete-time simulation model to describe the endogenous formation and periodic collapse of financial bubbles. While existing literature has extensively explored the statistical properties of…
In this paper we compare market price fluctuations with the response to fundamental price drops within the Lux-Marchesi model which is able to reproduce the most important stylized facts of real market data. Major differences can be…
We introduce a mathematical model on the dynamics of demand and supply incorporating collectability and saturation factors. Our analysis shows that when the fluctuation of the determinants of demand and supply is strong enough, there is…
We define and study a rather complex market model, inspired from the Santa Fe artificial market and the Minority Game. Agents have different strategies among which they can choose, according to their relative profitability, with the…
Many complex systems exhibit extreme events far more often than expected for a normal distribution. This work examines how self-similar bursts of activity across several orders of magnitude can emerge from first principles in systems that…
Emergent effects can arise in multi-agent systems (MAS) where execution is decentralized and reliant on local information. These effects may range from minor deviations in behavior to catastrophic system failures. To formally define these…
The efficient market hypothesis (EMH), based on rational expectations and market equilibrium, is the dominant perspective for modelling economic markets. However, the most notable critique of the EMH is the inability to model periods of…
In both finance and economics, quantitative models are usually studied as isolated mathematical objects --- most often defined by very strong simplifying assumptions concerning rationality, efficiency and the existence of disequilibrium…
In this paper we explore optimal liquidation in a market populated by a number of heterogeneous market makers that have limited inventory-carrying and risk-bearing capacity. We derive a reduced form model for the dynamic of their aggregated…
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…
We argue that the word ``critical'' in the title is not purely literary. Based on our and other previous work on nonlinear complex dynamical systems, we summarize present evidence, on the Oct. 1929, Oct. 1987, Oct. 1987 Hong-Kong, Aug. 1998…