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The aim of this work is to create systematic trading strategies built upon several financial crisis indicators based on the spectral properties of market dynamics. Within the limitations of our framework and data, we will demonstrate that…
We use standard physics techniques to model trading and price formation in a market under the assumption that order arrival and cancellations are Poisson random processes. This model makes testable predictions for the most basic properties…
How, and to what extent, does an interconnected financial system endogenously amplify external shocks? This paper attempts to reconcile some apparently different views emerged after the 2008 crisis regarding the nature and the relevance of…
Efficient risk transfer is an important condition for ensuring the sustainability of a market according to the established economics literature. In an inefficient market, significant financial imbalances may develop and potentially…
A public firm's bankruptcy prediction is an important financial research problem because of the security price downside risks. Traditional methods rely on accounting metrics that suffer from shortcomings like window dressing and…
The study efforts to explore and extend the crisis predictability by synthetically reviewing and comparing a full mixture of early warning models into two constitutions: crisis identifications and predictive models. Given empirical results…
This paper investigates the structural dynamics of stock market volatility through the Financial Chaos Index, a tensor- and eigenvalue-based measure designed to capture realized volatility via mutual fluctuations among asset prices.…
Propagation of balance-sheet or cash-flow insolvency across financial institutions may be modeled as a cascade process on a network representing their mutual exposures. We derive rigorous asymptotic results for the magnitude of contagion in…
This chapter first presents a rather personal view of some different aspects of predictability, going in crescendo from simple linear systems to high-dimensional nonlinear systems with stochastic forcing, which exhibit emergent properties…
In this brief review, we critically examine the recent work done on correlation-based networks in financial systems. The structure of empirical correlation matrices constructed from the financial market data changes as the individual stock…
We investigate the behavior of systems of interacting diffusion processes, known as volatility-stabilized market models in the mathematical finance literature, when the number of diffusions tends to infinity. We show that, after an…
Financial crises are known as crashes that result in a sudden loss of value of financial assets in large part and they continue to occur from time to time surprisingly. In order to discover features of the financial network, the pairwise…
``Self-Organised Criticality'' (SOC) is the mechanism by which complex systems spontaneously settle close to a *critical point*, at the edge between stability and chaos, and characterized by fat-tailed fluctuations and long-memory…
In setting up a stochastic description of the time evolution of a financial index, the challenge consists in devising a model compatible with all stylized facts emerging from the analysis of financial time series and providing a reliable…
Stochastic feedback systems give rise to a variety of notions of stability. The conditions for the stability of the median, mean, and variance stability conditions differ. These conditions can be stated explicitly for scalar discrete-time…
Financial time series exhibit a number of interesting properties that are difficult to explain with simple models. These properties include fat-tails in the distribution of price fluctuations (or returns) that are slowly removed at longer…
The increasing intensity and frequency of wildfires are causing significant economic and societal impacts on communities through direct effects on the built environment, particularly critical infrastructure. Electrical systems can both…
The concept of resilience embodies the quest towards the ability to sustain shocks, to suffer from these shocks as little as possible, for the shortest time possible, and to recover with the full functionalities that existed before the…
Building on similarities between earthquakes and extreme financial events, we use a self-organized criticality-generating model to study herding and avalanche dynamics in financial markets. We consider a community of interacting investors,…
In this article we model chaotic dynamics in financial markets by treating the market price, and market makers' inventory, as anharmonic oscillators with a nonlinear coupling. The market makers' risk appetite being the key parameter that…