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A taxonomy of large financial crashes proposed in the literature locates the burst of speculative bubbles due to endogenous causes in the framework of extreme stock market crashes, defined as falls of market prices that are outlier with…
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…
Episodes of market crashes have fascinated economists for centuries. Although many academics, practitioners and policy makers have studied questions related to collapsing asset price bubbles, there is little consensus yet about their causes…
We present an interacting-agent model of speculative activity explaining bubbles and crashes in stock markets. We describe stock markets through an infinite-range Ising model to formulate the tendency of traders getting influenced by the…
We present a dynamical theory of asset price bubbles that exhibits the appearance of bubbles and their subsequent crashes. We show that when speculative trends dominate over fundamental beliefs, bubbles form, leading to the growth of asset…
We introduce a new diffusion process Xt to describe asset prices within an economic bubble cycle. The main feature of the process, which differs from existing models, is the drift term where a mean-reversion is taken based on an exponential…
Financial bubbles and crashes have repeatedly caused economic turmoil notably but not only during the 2008 financial crisis. However, both in the popular press as well as scientific publications, the meaning of bubble is sometimes…
We propose that the minimal requirements for a model of stock market price fluctuations should comprise time asymmetry, robustness with respect to connectivity between agents, ``bounded rationality'' and a probabilistic description. We also…
Establishing unambiguously the existence of speculative bubbles is an on-going controversy complicated by the need of defining a model of fundamental prices. Here, we present a novel empirical method which bypasses all the difficulties of…
Maximum likelihood estimation applied to high-frequency data allows us to quantify intermittency in the fluctu- ations of asset prices. From time records as short as one month these methods permit extraction of a meaningful intermittency…
Many studies assume stock prices follow a random process known as geometric Brownian motion. Although approximately correct, this model fails to explain the frequent occurrence of extreme price movements, such as stock market crashes. Using…
To identify emerging interdependencies between traded stocks we investigate the behavior of the stocks of FTSE 100 companies in the period 2000-2015, by looking at daily stock values. Exploiting the power of information theoretical measures…
We present a detailed bubble analysis of the Bitcoin to US Dollar price dynamics from January 2012 to February 2018. We introduce a robust automatic peak detection method that classifies price time series into periods of uninterrupted…
By combining (i) the economic theory of rational expectation bubbles, (ii) behavioral finance on imitation and herding of investors and traders and (iii) the mathematical and statistical physics of bifurcations and phase transitions, the…
We present a synthesis of all the available empirical evidence in the light of recent theoretical developments for the existence of characteristic log-periodic signatures of growing bubbles in a variety of markets including 8 unrelated…
We present a self-consistent model for explosive financial bubbles, which combines a mean-reverting volatility process and a stochastic conditional return which reflects nonlinear positive feedbacks and continuous updates of the investors'…
In this brief review, we critically examine the recent work done on correlation-based networks in financial systems. The structure of empirical correlation matrices constructed from the financial market data changes as the individual stock…
The drift burst hypothesis postulates the existence of short-lived locally explosive trends in the price paths of financial assets. The recent U.S. equity and treasury flash crashes can be viewed as two high-profile manifestations of such…
This paper proposes a simple and parsimonious discrete-time simulation model to describe the endogenous formation and periodic collapse of financial bubbles. While existing literature has extensively explored the statistical properties of…
A microscopic model of financial markets is considered, consisting of many interacting agents (spins) with global coupling and discrete-time thermal bath dynamics, similar to random Ising systems. The interactions between agents change…