Related papers: Mini-Flash Crashes, Model Risk, and Optimal Execut…

We propose a picture of stock market crashes as critical points in a hierachical system with discrete scaling. The critical exponent is then complex, leading to log-periodic fluctuations in stock market indexes. We present ``experimental''…

A microeconomic approach is proposed to derive the fluctuations of risky asset price, where the market participants are modeled as prospect trading agents. As asset price is generated by the temporary equilibrium between demand and supply,…

Foreign exchange rates movements exhibit significant cross-correlations even on very short time-scales. The effect of these statistical relationships become evident during extreme market events, such as flash crashes.In this scenario, an…

In complex systems like financial market, risk tolerance of individuals is crucial for system resilience.The single-security price limit, designed as risk tolerance to protect investors by avoiding sharp price fluctuation, is blamed for…

Earthquakes occur because of abrupt slips on faults due to accumulated stress in the Earth's crust. Because most of these faults and their mechanisms are not readily apparent, deterministic earthquake prediction is difficult. For effective…

We develop a theoretical framework that aims to link micro-level option hedging and stock-specific factor exposure with macro-level market turbulence and explain endogenous volatility amplification during gamma-squeeze events. By explicitly…

Is the present economic and financial crisis similar to some previous one? It would be so nice to prove that universality laws exist for predicting such rare events under a minimum set of realistic hypotheses. First, I briefly recall…

Trading a financial asset pushes its price as well as the prices of other assets, a phenomenon known as cross-impact. The empirical estimation of this effect on complex financial instruments, such as derivatives, is an open problem. To…

Human decision-making in real-life deviates significantly from the optimal decisions made by fully rational agents, primarily due to computational limitations or psychological biases. While existing studies in behavioral finance have…

In this chapter we review some recent results on the dynamics of price formation in financial markets and its relations with the efficient market hypothesis. Specifically, we present the limit order book mechanism for markets and we…

I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect…

The principal aim of this work is the evidence on empirical way that catastrophic bifurcation breakdowns or transitions, proceeded by flickering phenomenon, are present on notoriously significant and unpredictable financial markets.…

The value of stocks, indices and other assets, are examples of stochastic processes with unpredictable dynamics. In this paper, we discuss asymmetries in short term price movements that can not be associated with a long term positive trend.…

While the long-ranged correlation of market orders and their impact on prices has been relatively well studied in the literature, the corresponding studies of limit orders and cancellations are scarce. We provide here an empirical study of…

The dual crises of the sub-prime mortgage crisis and the global financial crisis has prompted a call for explanations of non-equilibrium market dynamics. Recently a promising approach has been the use of agent based models (ABMs) to…

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…

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,…

We develop a forecasting methodology for providing credible forecasts for time series that have recently undergone a shock. We achieve this by borrowing knowledge from other time series that have undergone similar shocks for which…

Many dynamical systems operate in a fluctuating environment. However, even in low-dimensional setups, transitions and bifurcations have not yet been fully understood. In this Letter we focus on crises, a sudden flooding of the phase space…

Extreme events gain the attention of researchers due to their utmost importance in various contexts ranging from finance to climatology. This brings such recurrent events to the limelight of attention in interdisciplinary research. A…