Of Brains and Markets – A Structural Model of Market Risks

03 July 2024
3:00 pm - 4:00 pm


CSH Salon


Complexity Science Hub
  • Attendance: in person
  • Language: EN


Of Brains and Markets – A Structural Model of Market Risks

We explore an approach to understanding price fluctuations within a market by emphasizing the existence of functional dependencies(rather than correlations)  between asset prices. Interestingly, this approach suggests a class of models of a type used earlier to describe the dynamics of real and artificial neural networks. Statistical physics approaches turn out to be suitable for an analysis of their collective properties. In this talk, we first describe the basic phenomenology and motivate our modeling arguments, before moving on to present properties of one of the simplest models within the class of models suggested by our general considerations and discuss some major issues with inference and empirical verification. In particular, we focus on the natural creation of market states through the inclusion of interactions and how these then interfere with inference. This is primarily addressed in a synthetic setting. Finally, we investigate real data to test the ability of our approach to capturing some key features of the behavior of financial markets.



Reimer Kühn

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