Related papers: The domino effect for markets
Financial markets are prominent examples for highly non-stationary systems. Sample averaged observables such as variances and correlation coefficients strongly depend on the time window in which they are evaluated. This implies severe…
The credit crisis roiling the world's financial markets will likely take years and entire careers to fully understand and analyze. A short empirical investigation of the current trends, however, demonstrates that the losses in certain…
This paper uses the development of multi-agent market models to present a unified approach to the joint questions of how financial market movements may be simulated, predicted, and hedged against. We examine the effect of different market…
It is known that the impact of transactions on stock price (market impact) is a concave function of the size of the order, but there exists little quantitative theory that suggests why this is so. I develop a quantitative theory for the…
We introduce an auto-regressive model which captures the growing nature of realistic markets. In our model agents do not trade with other agents, they interact indirectly only through a market. Change of their wealth depends, linearly on…
In this paper we provide a comprehensive analysis of a structural model for the dynamics of prices of assets traded in a market originally proposed in [1]. The model takes the form of an interacting generalization of the geometric Brownian…
Using Trades and Quotes data from the Paris stock market, we show that the random walk nature of traded prices results from a very delicate interplay between two opposite tendencies: long-range correlated market orders that lead to…
The physics of a row of toppling dominoes is discussed. In particular the forces between the falling dominoes are analyzed and with this knowledge, the effect of friction has been incorporated. A set of limiting situations is discussed in…
Nostradamus, inspired by the French astrologer and reputed seer, is a detailed study exploring relations between environmental factors and changes in the stock market. In this paper, we analyze associative correlation and causation between…
We compare correlations and coherent structures in nuclei and financial markets. In the nuclear physics part we review giant resonances which can be interpreted as a coherent structure embedded in chaos. With similar methods we investigate…
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…
Price fluctuations in financial markets can be characterized by L\'evy's stable distribution, which is supported by the generalized central limit system. When the stable parameters were estimated from four different stock markets in long…
We use Random Matrix Theory (RMT) and information theory to analyze the correlations and flow of information between 64,939 news from The New York Times and 40 world financial indices during 10 months along the period 2015-2016. The set of…
In this paper we compare market price fluctuations with the response to fundamental price drops within the Lux-Marchesi model which is able to reproduce the most important stylized facts of real market data. Major differences can be…
The present paper provides a multi-period contagion model in the credit risk field. Our model is an extension of Davis and Lo's infectious default model. We consider an economy of n firms which may default directly or may be infected by…
We explore the effects of social influence in a simple market model in which a large number of agents face a binary choice: 'to buy/not to buy' a single unit of a product at a price posted by a single seller (the monopoly case). We consider…
This work investigates the effects of complex networks on the collective behavior of a three-state opinion formation model in economic systems. Our model considers two distinct types of investors in financial markets: noise traders and…
We present an analysis of the price impact associated with trades effected by different financial firms. Using data from the Spanish Stock Market, we find a high degree of heterogeneity across different market members, both in the…
The evolution of the probability distributions of Japan and US major market indices, NIKKEI 225 and NASDAQ composite index, and $JPY/DEM$ and $DEM/USD$ currency exchange rates is described by means of the Fokker-Planck equation (FPE). In…
Convergence of resource allocation algorithms is well covered in the literature as convergence to a steady state is important due to stability and performance. However, research is lacking when it comes to the propagation of change that…