Related papers: The Instability of Markets
Recurring international financial crises have adverse socioeconomic effects and demand novel regulatory instruments or strategies for risk management and market stabilization. However, the complex web of market interactions often impedes…
An interbank market lets participants pool the risk arising from the combination of illiquid investments and random withdrawals by depositors. But it also creates the potential for one bank's failure to trigger off avalanches of further…
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…
In this article, we present a discrete time modeling framework, in which the shape and dynamics of a Limit Order Book (LOB) arise endogenously from an equilibrium between multiple market participants (agents). We use the proposed modeling…
A model to describe the spontaneous formation of military and economic coalitions among a group of countries is proposed using spin glass theory. Between each couple of countries, there exists a bond exchange coupling which is either zero,…
A commonly used approach to study stability in a complex system is by analyzing the Jacobian matrix at an equilibrium point of a dynamical system. The equilibrium point is stable if all eigenvalues have negative real parts. Here, by…
Threats on the stability of a financial system may severely affect the functioning of the entire economy, and thus considerable emphasis is placed on the analyzing the cause and effect of such threats. The financial crisis in the current…
We investigate financial markets under model risk caused by uncertain volatilities. For this purpose we consider a financial market that features volatility uncertainty. To have a mathematical consistent framework we use the notion of…
In financial markets, greater volatility is usually considered synonym of greater risk and instability. However, large market downturns and upturns are often preceded by long periods where price returns exhibit only small fluctuations. To…
This paper discusses serious drawbacks of existing knowledge in macroeconomics and finance in explaining and predicting economic and financial phenomena. Complexity science is proposed as an alternative approach to be used in order to…
The stability of money value is an important requisite for a functioning economy, yet it critically depends on the actions of participants in the market themselves. Here we model the value of money as a dynamical variable that results from…
Stablecoins have gained significant popularity recently, with their market cap rising to over $180 billion. However, recent events have raised concerns about their stability. In this paper, we classify stablecoins into four types based on…
Recent years have seen an unprecedented rise of the role that technology plays in all aspects of human activities. Unavoidably, technology has heavily entered the Capital Markets trading space, to the extent that all major exchanges are now…
Inequality and its consequences are the subject of intense recent debate. Using a simplified model of the economy, we address the relation between inequality and liquidity, the latter understood as the frequency of economic exchanges.…
This paper investigates some indicators of financial development in select countries with currency board systems and raises some questions about the connection between financial development and growth in currency board systems. Most of…
Financial crises are a recurrent phenomenon with important effects on the real economy. The financial system is inherently fragile and it is therefore of great importance to be able to measure and characterize its systemic stability.…
We present an empirical analysis of the microstructure of financial markets and, in particular, of the static and dynamic properties of liquidity. We find that on relatively large time scales (15 minutes) large price fluctuations are…
Financial instability has become a significant issue in today's society. While research typically focuses on financial aspects, there is a tendency to overlook time-related aspects of unstable work schedules. The inability to rely on…
This paper investigates two mechanisms of financial contagion that are, firstly, the correlated exposure of banks to the same source of risk, and secondly the direct exposure of banks in the interbank market. It will consider a random…
As the FX markets continue to evolve, many institutions have started offering passive access to their internal liquidity pools. Market makers act as principal and have the opportunity to fill those orders as part of their risk management,…