A primer on reflexivity and price dynamics under systemic risk

2013/01/27 by Tom Fischer, Fischer, Tom
Economics, Econometrics and Finance · #Complex Systems and Time Series Analysis #Economic theories and models #Monetary Policy and Economic Impact #msc:91B24 #msc:91B25 #msc:91B52 #msc:91G20 #msc:91G40 #msc:91G50 #q-fin.GN

paper · pdf · doi:10.48550/arxiv.1301.6415

arxiv created 2013/01/27 · arxiv updated 2013/01/29

Abstract

A simple quantitative example of a reflexive feedback process and the resulting price dynamics after an exogenous price shock to a financial network is presented. Furthermore, an outline of a theory that connects financial reflexivity, which stems from cross-ownership and delayed or incomplete information, and no-arbitrage pricing theory under systemic risk is provided.

Related

• Quantifying reflexivity in financial markets: towards a prediction of flash crashes
• Self-referential behaviour, overreaction and conventions in financial markets
• Critical reflexivity in financial markets: a Hawkes process analysis
• When panic makes you blind: a chaotic route to systemic risk
• Reflexivity as Prompt: Does Awareness of Self-Reinforcing Market Dynamics Improve LLMs as Financial Market Forecasters?