Monday, June 21, 2010

Multifractal Financial Chaos in an Artificial Economy

Carlos Pedro Dos Santos Gonçalves 
UNIDE - ISCTE Business School - Lisbon University Institute

June 19, 2010

A model is proposed of a population of competing companies that are in a coevolutionary race and whose evolutionary performance is evaluated by a financial market, composed of value investors and of a breed of arbitrageurs that perform bargain arbitrage, trying to identify 'bargains' in the form of relative misspricings and, acting accordingly, buying assets with higher value at lower prices and selling assets with lower value at higher prices.

The model's equations are based on coupled networks of nonlinear maps, in this way, the model is focused on a coevolutionary process between companies and financial market. It is shown that, for a wide range of dynamical couplings and parameters, Multifractal Self-organized Criticality (MSOC) takes place, with the emergence of patterns of turbulence that closely resemble actual financial turbulence. The relation between arbitrage and multifractal financial turbulence is addressed.

Keywords: Multifractal chaos, financial turbulence, multifractal self-organized criticality, evolutionary arbitrage theory, financial markets’ efficiency, tail risk, evolutionary finance, microscopic financial modeling

Sunday, June 13, 2010

From Eternity to Eternity…

By: Maria Odete Madeira

Being the being of the being the same being that is of the becoming, as being that becomes, and, thus, alterity of itself, in itself, fundamental issues are placed, in what regards the relations of scale and the laws of structure that may be perceptioned, apprehended and formalized towards fixed human languages, which, due to that fixity, are incapable of capturing the fundamental (co)dynamics of simultaneous permanence and change in a same being, a (co)dynamics in which the constituent and constitutive antithetical movement determines the dynamics of scale that displace themselves in percolating multifractal webs, dependent upon the systemic processing (co)implicated in the locality/nonlocality of the respective systems.
Having, also, to consider, in those same issues, that the limit to the formalization, on the part of the human agents, is processed at the level of the individuated limit of the system itself, as self-referent noumenon, dependent upon its preformative and formative initial conditions, inaccessible to possible algorithmic schemes, assembled from the systemic effects, observed in ontological situational contexts and processes that spill over towards eidetics that transcend the mathematical reason, as human language that develops and uses disciplinary tools made available towards effects of calculation and measurement.
Thus, other mechanisms of cognitive processing will have to be introduced, such as, processes and arbitria of systemic synchronization, linked to autopoietic cognitive reasons and dynamics.