Related papers: Metastable Financial Markets
Quasi-equilibrium models for aggregate variables are widely-used throughout finance and economics. The validity of such models depends crucially upon assuming that the systems' participants behave both independently and in a Markovian…
Changes in market conditions present challenges for investors as they cause performance to deviate from the ranges predicted by long-term averages of means and covariances. The aim of conditional asset allocation strategies is to overcome…
We show that nonequilibrium dynamics can play a constructive role in unsupervised machine learning by inducing the spontaneous emergence of latent-state cycles. We introduce a model in which visible and hidden variables interact through two…
We present a macro-finance model with innovation and knowledge spillover. Skilled agents engage in R&D activities (establish firms) or work in the knowledge-intensive sector. Unskilled agents work in the traditional sector. Knowledge…
We reformulate the Cont-Bouchaud model of financial markets in terms of classical "super-spins" where the spin value is a measure of the number of individual traders represented by a portfolio manager of an investment agency. We then extend…
Transitions between metastable states are commonly observed in the neural system and underlie various cognitive functions such as working memory. In a previous study, we have developed a neural network model with the slow and fast…
The volatility of financial instruments is rarely constant, and usually varies over time. This creates a phenomenon called volatility clustering, where large price movements on one day are followed by similarly large movements on successive…
We review the recent approaches to modelling financial markets based on multi-agent systems. After a brief summary of the basic stylised facts observed in real-market time-series we discuss some simple agent-based systems which are…
We explore the applicability of the causal analysis based on temporally shifted (lagged) Pearson correlation applied to diverse time series of different natures in context of the problem of financial market prediction. Theoretical…
Prices of commodities or assets produce what is called time-series. Different kinds of financial time-series have been recorded and studied for decades. Nowadays, all transactions on a financial market are recorded, leading to a huge amount…
Arguably the most important problem in quantitative finance is to understand the nature of stochastic processes that underlie market dynamics. One aspect of the solution to this problem involves determining characteristics of the…
Single index financial market models cannot account for the empirically observed complex interactions between shares in a market. We describe a multi-share financial market model and compare characteristics of the volatility, that is the…
Static stability in economic models means negative incentives for deviation from equilibrium strategies, which we expect to assure a return to equilibrium, i.e., dynamic stability, as long as agents respond to incentives. There have been…
This article provides a self-contained overview of the theory of rational asset price bubbles. We cover topics from basic definitions, properties, and classical results to frontier research, with an emphasis on bubbles attached to real…
In the past few decades considerable effort has been expended in characterizing and modeling financial time series. A number of stylized facts have been identified, and volatility clustering or the tendency toward persistence has emerged as…
Natural animal behavior displays rich lexical and temporal dynamics, even in a stable environment. This implies that behavioral variability arises from sources within the brain, but the origin and mechanics of these processes remain largely…
We analyze the daily stock data of the Nasdaq Composite index in the 22-year period 1992-2013 and identify market states as clusters of correlation matrices with similar correlation structures. We investigate the stability of the…
Financial transactions constitute connections between entities and through these connections a large scale heterogeneous weighted graph is formulated. In this labyrinth of interactions that are continuously updated, there exists a variety…
High frequency data in finance have led to a deeper understanding on probability distributions of market prices. Several facts seem to be well stablished by empirical evidence. Specifically, probability distributions have the following…
Metastability appears when a thermodynamic system, such as supercooled water (which is liquid below freezing temperature), lands on the "wrong" side of a phase transition, and remains for a very long time in a state different from its…