Related papers: Critical Crashes
This paper provides robust, new evidence on the causal drivers of market troughs. We demonstrate that conclusions about these triggers are critically sensitive to model specification, moving beyond restrictive linear models with a flexible…
The financial turmoil surrounding the Great Recession called for unprecedented intervention by Central Banks: unconventional policies affected various areas in the economy, including stock market volatility. In order to evaluate such…
We introduce an analytical model based on birth-death clustering processes to help understanding the empirical log-periodic corrections to power-law scaling and the finite-time singularity as reported in several domains including rupture,…
The stock market's reaction to the external risk shock is closely related to the cross-shareholding network structure. This paper takes the public information of listed companies in the A-share securities market as the primary sample to…
The Olami--Feder--Christensen earthquake model is often considered the prototype dissipative self--organized critical model. It is shown that the size distribution of events in this model results from a complex interplay of several…
To understand the emergence of Ultrafast Extreme Events (UEEs), the influence of algorithmic trading or high-frequency traders is of major interest as they make it extremely difficult to intervene and to stabilize financial markets. In an…
Interacting physical systems in the neighborhood of criticality (and massive continuum field theories) can often be characterized by just two physical scales: a (macroscopic) correlation length and a (microscopic) interaction range, related…
Having reliable estimates of the occurrence rates of extreme events is highly important for insurance companies, government agencies and the general public. The rarity of an extreme event is typically expressed through its return period,…
We model systemic risk using a common factor that accounts for market-wide shocks and a tail dependence factor that accounts for linkages among extreme stock returns. Specifically, our theoretical model allows for firm-specific impacts of…
In complex systems, external parameters often determine the phase in which the system operates, i.e., its macroscopic behavior. For nearly a century, statistical physics has extensively studied systems' transitions across phases,…
We study precursors to the global market crash that occurred on all main stock exchanges throughout the world in October 2008 about three weeks after the bankruptcy of Lehman Brothers Holdings Inc. on 15 September. We examine the collective…
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 define a financial bubble as a period of unsustainable growth, when the price of an asset increases ever more quickly, in a series of accelerating phases of corrections and rebounds. More technically, during a bubble phase, the price…
Distribution crises are manifested by a great discrepancy between the demand and the supply of a critically important good, for a period of time. In this paper, we suggest a hybrid market mechanism for minimising the negative consequences…
We introduce a modification of the OFC earthquake model [Phys. Rev. Lett. 68, 1244 (1992)] in order to improve resemblance with the Burridge and Knopoff mechanical model and with possible laboratory experiments. A constant force continually…
This chapter first presents a rather personal view of some different aspects of predictability, going in crescendo from simple linear systems to high-dimensional nonlinear systems with stochastic forcing, which exhibit emergent properties…
Systemic risk is a rapidly developing area of research. Classical financial models often do not adequately reflect the phenomena of bubbles, crises, and transitions between them during credit cycles. To study very improbable events,…
External or internal shocks may lead to the collapse of a system consisting of many agents. If the shock hits only one agent initially and causes it to fail, this can induce a cascade of failures among neighoring agents. Several critical…
Critical transitions, or large changes in the state of a system after a small change in the system's external conditions or parameters, commonly occur in a wide variety of disciplines, from the biological and social sciences to physics.…
Avalanches, or Avalanche-like, events are often observed in the dynamical behaviour of many complex systems which span from solar flaring to the Earth's crust dynamics and from traffic flows to financial markets. Self-organized criticality…