The question we address here is of whether phenomena of collective bankruptcies are related to self-organized criticality. In order to answer it we propose a simple model of banking networks based on the random directed percolation. We study effects of one bank failure on the nucleation of...

We propose a route for the evaluation of risk based on a transformation of the covariance matrix. The approach uses a `potential' or `objective' function. This allows us to rescale data from different assets (or sources) such that each data set then has similar statistical properties in terms of...

Time changes of noise level at Warsaw Stock Market are analyzed using a recently developed method basing on properties of the coarse grained entropy. The condition of the minimal noise level is used to build an efficient portfolio. Our noise level approach seems to be a much better tool for risk...

Using a recently developed method of noise level estimation that makes use of properties of the coarse grained-entropy we have analyzed the noise level for the Dow Jones index and a few stocks from the New York Stock Exchange. We have found that the noise level ranges from 40 to 80 percent of...

We combine forward investment performance processes and ambiguity averse portfolio selection. We introduce the notion of robust forward criteria which addresses the issues of ambiguity in model specification and in preferences and investment horizon specification. It describes the evolution of...

In quantitative finance, we often model asset prices as a noisy Ito semimartingale. As this model is not identifiable, approximating by a time-changed Levy process can be useful for generative modelling. We give a new estimate of the normalised volatility or time change in this model, which...

This paper presents the first empirical assessment of the causal relationship between social capital and health in Italy. The analysis draws on the 2000 wave of the Multipurpose Survey on Household conducted by the Italian Institute of Statistics on a representative sample of the population (n =...

In this study, we examine how the rice futures market in prewar Japan evolved in light of changes in market efficiency over time. Using a non-Bayesian time-varying VAR model, we compute the time-varying degree of market efficiency of the rice futures exchanges in Tokyo and Osaka. Then, we...

We use the GARCH model with a fat-tailed error distribution described by a rational function and apply it for the stock price data on the Tokyo Stock Exchange. To determine the model parameters we perform the Bayesian inference to the model. The Bayesian inference is implemented by the...

Under proportional transaction costs, a price process is said to have a consistent price system, if there is a semimartingale with an equivalent martingale measure that evolves within the bid-ask spread. We show that a continuous, multi-asset price process has a consistent price system, under...