Exogenous and endogenous crashes as phase transitions in complex financial systems

Fry, John

Abstract

In this paper we provide a unifying framework for a set of seemingly disparate models for exogenous and endogenous shocks in complex financial systems. Markets operate by balancing intrinsic levels of risk and return. This remains true even in the midst of transitory exogenous and endogenous shocks. Changes in market regime (bearish to bullish and bullish to bearish) can be explicitly shown to represent a phase transition from random to deterministic behaviour in prices. The resulting models refine the empirical analysis in a number of previous papers.

Citation

Fry, J. (2012). Exogenous and endogenous crashes as phase transitions in complex financial systems. European Physical Journal B : Condensed Matter and Complex Systems, 85, Article 405. https://doi.org/10.1140/epjb/e2012-30234-8

• Journal Article Type: Article
• Acceptance Date: Jul 17, 2012
• Online Publication Date: Dec 13, 2012
• Publication Date: 2012-12
• Deposit Date: Feb 4, 2022
• Journal: European Physical Journal B
• Print ISSN: 1434-6028
• Publisher: EDP Sciences
• Peer Reviewed: Peer Reviewed
• Volume: 85
• Article Number: 405
• DOI: https://doi.org/10.1140/epjb/e2012-30234-8
• Keywords: Statistical and Nonlinear Physics
• Public URL: https://hull-repository.worktribe.com/output/3920986