Related papers: Complexity-based Financial Stress Evaluation
This thesis applies entropy as a model independent measure to address three research questions concerning financial time series. In the first study we apply transfer entropy to drawdowns and drawups in foreign exchange rates, to study their…
The study of the critical dynamics in complex systems is always interesting yet challenging. Here, we choose financial market as an example of a complex system, and do a comparative analyses of two stock markets - the S&P 500 (USA) and…
We investigate the relative market efficiency in financial market data, using the approximate entropy(ApEn) method for a quantification of randomness in time series. We used the global foreign exchange market indices for 17 countries during…
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…
The integration and innovation of finance and technology have gradually transformed the financial system into a complex one. Analyses of the causesd of abnormal fluctuations in the financial market to extract early warning indicators…
We utilize a chartist-fundamentalist model to examine the limits of informationally efficient stock markets. In our model, chartists are permanently active in the stock market, while fundamentalists trade only when their…
Equity premium, the surplus returns of stocks over bonds, has been an enduring puzzle. While numerous prior works approach the problem assuming the utility of money is invariant across contexts, our approach implies that in efficient…
This article is a follow-up of a short essay that appeared in Nature 455, 1181 (2008) [arXiv:0810.5306]. It has become increasingly clear that the erratic dynamics of markets is mostly endogenous and not due to the rational processing of…
Stylized facts can be regarded as constraints for any modeling attempt of price dynamics on a financial market, in that an empirically reasonable model has to reproduce these stylized facts at least qualitatively. The dynamics of market…
A minimal stochastic dynamical model of the interbank network is introduced, with linear interactions mediated by an integral of recent variations. Defining stress as the variance over the banks' states, the interaction correction to the…
This paper suggests that business cycles may be a manifestation of coupled real economy and stock market dynamics and describes a mechanism that can generate economic fluctuations consistent with observed business cycles. To this end, we…
Standard methods and theories in finance can be ill-equipped to capture highly non-linear interactions in financial prediction problems based on large-scale datasets, with deep learning offering a way to gain insights into correlations in…
We present a novel methodology to quantify the "impact" of and "response" to market shocks. We apply shocks to a group of stocks in a part of the market, and we quantify the effects in terms of average losses on another part of the market…
We introduce a pathwise approach to analyze the relative performance of an equity portfolio with respect to a benchmark market portfolio. In this energy-entropy framework, the relative performance is decomposed into three components: a…
In this paper a novel approach for a measurement of stresses in a capital, which induce the capital flows between economic systems, is proposed. The proposals appeal to an apparatus offered by the statistical theory of shape. We propose a…
Systemic liquidity risk, defined by the IMF as "the risk of simultaneous liquidity difficulties at multiple financial institutions", is a key topic in macroprudential policy and financial stress analysis. Specialized models to simulate…
We measure the influence of different time-scales on the dynamics of financial market data. This is obtained by decomposing financial time series into simple oscillations associated with distinct time-scales. We propose two new time-varying…
We propose a new framework for measuring connectedness among financial variables that arises due to heterogeneous frequency responses to shocks. To estimate connectedness in short-, medium-, and long-term financial cycles, we introduce a…
Markets efficiency implies that the stock returns are intrinsically unpredictable, a property that makes markets comparable to random number generators. We present a novel methodology to investigate ultra-high frequency financial data and…
This work presents an asset pricing model that under rational expectation equilibrium perspective shows how, depending on risk aversion and noise volatility, a risky-asset has one equilibrium price that differs in term of efficiency: an…