Papers
Topics
Authors
Recent
Gemini 2.5 Flash
Gemini 2.5 Flash
121 tokens/sec
GPT-4o
9 tokens/sec
Gemini 2.5 Pro Pro
47 tokens/sec
o3 Pro
4 tokens/sec
GPT-4.1 Pro
38 tokens/sec
DeepSeek R1 via Azure Pro
28 tokens/sec
2000 character limit reached

Self-organised criticality in high frequency finance: the case of flash crashes (2110.13718v1)

Published 26 Oct 2021 in q-fin.TR and physics.data-an

Abstract: With the rise of computing and artificial intelligence, advanced modeling and forecasting has been applied to High Frequency markets. A crucial element of solid production modeling though relies on the investigation of data distributions and how they relate to modeling assumptions. In this work we investigate volume distributions during anomalous price events and show how their tail exponents < 2 indicate a diverging second moment of the distribution, i.e. variance. We then tie the dynamics of flash crashes to self-organised criticality. The findings are of great relevance for regulators and market makers as they advocate for rigorous heavy-tailed modeling of risk and changes in regulation to avoid simultaneous liquidity withdrawals and hard risk constraints which lead to synchronisation and critical events.

Citations (3)

Summary

We haven't generated a summary for this paper yet.