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Complexity Digest wrote a new blog post titled Algorithmic Cognition and the Computational Nature of the Mind
The idea that complexity or, its reverse, simplicity are essential concepts for cognitive psychology was already understood in the middle of the twentieth century (Mach 1914), and these concepts have remained salient ever since (Oizumi et al. 2014). As early as the 1990s, the algorithmic theory of information was referenced by some researchers in psychology, who recommended the use of algorithmic complexity as a universal normative measure of complexity. Nevertheless, the noncomputability of algorithmic complexity was deemed an insurmountable obstacle, and more often than not it merely served...
20 hours ago
Quantitative Finance at arXiv wrote a new blog post titled Polynomial Jump-Diffusion Models. (arXiv:1711.08043v1 [q-fin.MF])
We develop a comprehensive mathematical framework for polynomial jump-diffusions, which nest affine jump-diffusions and have broad applications in finance. We show that the polynomial property is preserved under exponentiation and subordination. We present a generic method for option pricing based on moment expansions. As an application, we introduce a large class of novel financial asset pricing models that are based on polynomial jump-diffusions.
Quantitative Finance at arXiv wrote a new blog post titled A New Interpretation of the Economic Complexity Index. (arXiv:1711.08245v1 [q-fin.EC])
The Economic Complexity Index (ECI) introduced by Hidalgo and Hausmann (2009) has been successful in explaining differences in GDP/capita and economic growth across countries. There has been confusion, however, about what it means and why it works. The ECI was originally motivated as an enhancement of diversity which is defined as the number of products a country is competitive in. However, the ECI is orthogonal to diversity. Nor is the ECI an eigenvalue centrality measure - in fact, the standard eigenvalue centrality measure applied to the export similarity matrix is equivalent to diversity....
Quantitative Finance at arXiv wrote a new blog post titled Asymmetric return rates and wealth distribution influenced by the introduction of technical analysis into a behavioral agent based model. (arXiv:1711.08282v1 [q-fin.GN])
Behavioral Finance has become a challenge to the scientific community. Based on the assumption that behavioral aspects of investors may explain some features of the Stock Market, we propose an agent based model to study quantitatively this relationship. In order to approximate the simulated market to the complexity of real markets, we consider that the investors are connected among them through a small world network; each one has its own psychological profile (Imitation, Anti-Imitation, Random); two different strategies for decision making: one of them is based on the trust neighborhood of...
Quantitative Finance at arXiv wrote a new blog post titled Valuation of equity warrants for uncertain financial market. (arXiv:1711.08356v1 [q-fin.PR])
In this paper, within the framework of uncertainty theory, the valuation of equity warrants is investigated. Different from the methods of probability theory, the equity warrants pricing problem is solved by using the method of uncertain calculus. Based on the assumption that the firm price follows an uncertain differential equation, the equity warrants pricing formula is obtained for uncertain stock model.
Complexity Digest wrote a new blog post titled Modelling the effects of phylogeny and body size on within-host pathogen replication and immune response
Understanding how quickly pathogens replicate and how quickly the immune system responds is important for predicting the epidemic spread of emerging pathogens. Host body size, through its correlation with metabolic rates, is theoretically predicted to impact pathogen replication rates and immune system response rates. Here, we use mathematical models of viral time courses from multiple species of birds infected by a generalist pathogen (West Nile Virus; WNV) to test more thoroughly how disease progression and immune response depend on mass and host phylogeny. We use hierarchical Bayesian...
2 days ago
Complexity Digest wrote a new blog post titled How Self-Organization Happens
Self-organization refers to natural processes of human relating, that are similar at all scales of order in the natural world.The dynamics of self-organization are much more rich and complex than the simple patterns we use to model them.Being able to make sense of these dynamics enables us to build new potentials in teams. The level of trust rises when we recognize our basic human capacity to collaborate with each other. Narrative-based applications can visualize some of the subtle patterns that shape a team’s potential for acting in certain ways (and not others) over...
2 days ago
Complexity Digest wrote a new blog post titled Analytical framework for the study of epidemic models on activity driven networks
Network theory has greatly contributed to an improved understanding of epidemic processes, offering an empowering framework for the analysis of real-world data, prediction of disease outbreaks, and formulation of containment strategies. However, the current state of knowledge largely relies on time-invariant networks, which are not adequate to capture several key features of a number of infectious diseases. Activity driven networks (ADNs) constitute a promising modelling framework to describe epidemic spreading over time varying networks, but a number of technical and theoretical gaps remain...
2 days ago
Complexity Digest wrote a new blog post titled Stream Graphs and Link Streams for the Modeling of Interactions over Time
Graph theory provides a language for studying the structure of relations, and it is often used to study interactions over time too. However, it poorly captures the both temporal and structural nature of interactions, that calls for a dedicated formalism. In this paper, we generalize graph concepts in order to cope with both aspects in a consistent way. We start with elementary concepts like density, clusters, or paths, and derive from them more advanced concepts like cliques, degrees, clustering coefficients, or connected components. We obtain a language to directly deal with interactions...
2 days ago
The Practical Quant wrote a new blog post titled The current state of Apache Kafka
[A version of this post appears on the O'Reilly Radar.]The O’Reilly Data Show Podcast: Neha Narkhede on data integration, microservices, and Kafka’s roadmap.In this episode of the Data Show, I spoke with Neha Narkhede, co-founder and CTO of Confluent. As I noted in a recent post on “The Age of Machine Learning,” data integration and data enrichment are non-trivial and ongoing challenges for most companies. Getting data ready for analytics—including machine learning—remains an area of focus for most companies. It turns out, “data lakes” have become staging grounds for data; more refinement...
2 days ago
The Reformed Broker wrote a new blog post titled The Year of Living Dangerously
"We're doing things differently here...Guys, I feel like you're not hearing me...What are they gonna do?" ...
2 days ago
Quantitative Finance at arXiv wrote a new blog post titled Statistical properties of market collective responses. (arXiv:1711.07630v1 [q-fin.ST])
We empirically analyze the price and liquidity responses to trade signs, traded volumes and signed traded volumes. Utilizing the singular value decomposition, we explore the interconnections of price responses and of liquidity responses across the whole market. The statistical characteristics of their singular vectors are well described by the $t$ location-scale distribution. Furthermore, we discuss the relation between prices and liquidity with respect to their overlapping factors. The factors of price and liquidity changes are non-random when these factors are related to the traded...
2 days ago
Quantitative Finance at arXiv wrote a new blog post titled Corporate payments networks and credit risk rating. (arXiv:1711.07677v1 [cs.SI])
Understanding the structure of interactions between corporate firms is critical to identify risk concentration and the possible pathways of propagation of financial distress. In this paper we consider the in- teraction due to payments and, by investigating a large proprietary dataset of Italian firms, we characterize the topological properties of the payment network. We then focus on the relation between the net- work of payments and the risk of firms. We show the existence of an homophily of risk, i.e. the tendency of firms with similar risk pro- file to be statistically more connected...
2 days ago
Quantitative Finance at arXiv wrote a new blog post titled A New Approach for Solving the Market Clearing Problem With Uniform Purchase Price and Curtailable Block Orders. (arXiv:1711.07731v1 [q-fin.PR])
The European market clearing problem is characterized by a set of heterogeneous orders and rules that force the implementation of heuristic and iterative solving methods. In particular, curtailable block orders and the uniform purchase price (UPP) pose serious difficulties. A block is an order that spans over multiple hours, and can be either fully accepted or fully rejected. The UPP prescribes that all consumers pay a common price, i.e., the UPP, in all the zones, while producers receive zonal prices, which can differ from one zone to another. The market clearing problem in the presence of...
2 days ago
Quantitative Finance at arXiv wrote a new blog post titled Price Optimisation for New Business. (arXiv:1711.07753v1 [q-fin.CP])
This contribution is concerned with price optimisation of the new business for a non-life product. Due to high competition in the insurance market, non-life insurers are interested in increasing their conversion rates on new business based on some profit level. In this respect, we consider the competition in the market to model the probability of accepting an offer for a specific customer. We study two optimisation problems relevant for the insurer and present some algorithmic solutions for both continuous and discrete case. Finally, we provide some applications to a motor insurance dataset.
2 days ago
Complexity Digest wrote a new blog post titled Curtailing cascading failures
Cascading behaviors are ubiquitous, from power-grid failures (1) to “flash crashes” in financial markets (2, 3) to the spread of political movements such as the “Arab Spring” (4). The causes of these cascades are varied with many unknowns, which make them extremely difficult to predict or contain. Particularly challenging are cascading failures that arise from the reorganization of flows on a network, such as in electric power grids, supply chains, and transportation networks. Here, the network edges (or “links”) have some fixed capacity, and we see that...
3 days ago
Complexity Digest wrote a new blog post titled Small vulnerable sets determine large network cascades in power grids
Sometimes a power failure can be fairly local, but other times, a seemingly identical initial failure can cascade to cause a massive and costly breakdown in the system. Yang et al. built a model for the North American power grid network based on samples of data covering the years 2008 to 2013 (see the Perspective by D’Souza). Although the observed cascades were widespread, a small fraction of all network components, particularly the ones that were most cohesive within the network, were vulnerable to cascading failures. Larger cascades were associated with concurrent triggering events...
3 days ago