Related papers: Metastable Financial Markets
We develop a model for credit rating migration that accounts for the impact of economic state fluctuations on default probabilities. The joint process for the economic state and the rating is modelled as a time-homogeneous Markov chain.…
For a general class of dynamic and stochastic structural models, we show that (i) non-linearity in economic dynamics is a necessary and sufficient condition for time-varying parameters (TVPs) in the reduced-form VARMA process followed by…
In a financial market, for agents with long investment horizons or at times of severe market stress, it is often changes in the asset price that act as the trigger for transactions or shifts in investment position. This suggests the use of…
Tracking the build-up of financial vulnerabilities is a key component of financial stability policy. Due to the complexity of the financial system, this task is daunting, and there have been several proposals on how to manage this goal. One…
Cortical neurons emit seemingly erratic trains of action potentials or "spikes," and neural network dynamics emerge from the coordinated spiking activity within neural circuits. These rich dynamics manifest themselves in a variety of…
The paper presents a step forward into the development of the theory of meaning. Stock and financial markets are examined from communication-theoretical perspective on the dynamics of information and meaning. This study focuses on the link…
Financial time-series forecasting is critical for maintaining economic stability, guiding informed policymaking, and promoting sustainable investment practices. However, it remains challenging due to various underlying pattern shifts. These…
Markov branching systems form a fundamental class of stochastic models that are extensively applied in biology, physics, finance, and other domains. These systems are distinguished by their continuous-time evolution and inherent branching…
Standard approaches to the theory of financial markets are based on equilibrium and efficiency. Here we develop an alternative based on concepts and methods developed by biologists, in which the wealth invested in a financial strategy is…
For nearly every major stock market there exist equity and implied volatility indices. These play important roles within finance: be it as a benchmark, a measure of general uncertainty or a way of investing or hedging. It is well known in…
We analyze the linear response of a market network to shocks based on the bipartite market model we introduced in an earlier paper, which we claimed to be able to identify the time-line of the 2009-2011 Eurozone crisis correctly. We show…
This paper aims to provide a simple modelling of speculative bubbles and derive some quantitative properties of its dynamical evolution. Starting from a description of individual speculative behaviours, we build and study a second order…
In this paper, we provide a simple, ``generic'' interpretation of multifractal scaling laws and multiplicative cascade process paradigms in terms of volatility correlations. We show that in this context 1/f power spectra, as observed…
We show that a simple model of a spatially resolved evolving economic system, which has a steady state under simultaneous updating, shows stable oscillations in price when updated asynchronously. The oscillations arise from a gradual…
We propose a novel framework for modeling time-varying persistence in economic time series, allowing for smoothly evolving heterogeneity in shock dynamics. We leverage localized regression techniques to flexibly identify changes in…
Using the mechanics of creep in material sciences as a metaphor, we present a general framework to understand the evolution of financial, economic and social systems and to construct scenarios for the future. In a nutshell, highly…
We investigate a chain of spinless fermions with nearest-neighbour interactions that are subject to a local loss process. We determine the time evolution of the system using matrix product state methods. We find that at intermediate times a…
Volatility, fitting with first order Landau expansion, stationarity, and causality of the Taiwan stock market (TAIEX) are investigated based on daily records. Instead of consensuses that consider stock market index change as a random time…
Is the large influence that mutual funds assert on the U.S. financial system spread across many funds, or is it is concentrated in only a few? We argue that the dominant economic factor that determines this is market efficiency, which…
Stochastic systems often exhibit multiple viable metastable states that are long-lived. Over very long timescales, fluctuations may push the system to transition between them, drastically changing its macroscopic configuration. In realistic…