Related papers: Business Cycles as Collective Risk Fluctuations
The study of the dynamic behavior of cross-sectional ranks over time for functional data and the ranks of the observed curves at each time point and their temporal evolution can yield valuable insights into the time dynamics of functional…
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…
Non-communicable diseases like diabetes, obesity and certain forms of cancer have been increasing in many countries at alarming levels. A difficulty in the conception of policies to reverse these trends is the identification of the drivers…
We introduce a new diffusion process Xt to describe asset prices within an economic bubble cycle. The main feature of the process, which differs from existing models, is the drift term where a mean-reversion is taken based on an exponential…
Complex systems comprise a large number of interacting elements, whose dynamics is not always a priori known. In these cases -- in order to uncover their key features -- we have to turn to empirical methods, one of which was recently…
Different approaches to defining dynamic market risk measures are available in the literature. Most are focused or derived from probability theory, economic behavior or dynamic programming. Here, we propose an approach to define and…
Financial markets across all asset classes are known to exhibit trends. These trends have been exploited by traders for decades. Here, we empirically measure when trends revert, based on 30 years of daily futures prices for equity indices,…
We study the dynamics of a spin-flip model with a mean field interaction. The system is non reversible, spacially inhomogeneous, and it is designed to model social interactions. We obtain the limiting behavior of the empirical averages in…
The dynamics of a stock market with heterogeneous agents is discussed in the framework of a recently proposed spin model for the emergence of bubbles and crashes. We relate the log returns of stock prices to magnetization in the model and…
A methodology is developed to identify, as units of study, each decrease in the value of a stock from a given maximum price level. A critical level in the amount of price declines is found to separate a segment operating under a random walk…
Stock price changes occur through transactions, just as diffusion in physical systems occurs through molecular collisions. We systematically explore this analogy and quantify the relation between trading activity - measured by the number of…
We review the evidence that the erratic dynamics of markets is to a large extent of endogenous origin, i.e. determined by the trading activity itself and not due to the rational processing of exogenous news. In order to understand why and…
The accurate characterization of the business cycles in the nonlinear dynamic financial and economic systems in the time of globalization represents a formidable research problem. The central banks and other financial institutions make…
We attempt to explain stock market dynamics in terms of the interaction among three variables: market price, investor opinion and information flow. We propose a framework for such interaction and apply it to build a model of stock market…
We study a lattice model of ``commons'', where a resource is shared locally among the agents of various cooperative tendency. The payoff function of an agent is proportional to the fraction of his operation rate and the net output of the…
The transient fluctuation of the prosperity of firms in a network economy is investigated with an abstract stochastic model. The model describes the profit which firms make when they sell materials to a firm which produces a product and the…
We present a simple agent-based model of a financial system composed of leveraged investors such as banks that invest in stocks and manage their risk using a Value-at-Risk constraint, based on historical observations of asset prices. The…
Complex systems consist of many interacting elements which participate in some dynamical process. The activity of various elements is often different and the fluctuation in the activity of an element grows monotonically with the average…
Many studies assume stock prices follow a random process known as geometric Brownian motion. Although approximately correct, this model fails to explain the frequent occurrence of extreme price movements, such as stock market crashes. Using…
Here, we examine a mean-field game (MFG) that models the economic growth of a population of non-cooperative rational agents. In this MFG, agents are described by two state variables - the capital and consumer goods they own. Each agent…