Using the framework of factor models, we establish the general expression of the coefficient of tail dependence between the market and a stock (i.e., the probability that the stock incurs a large loss, assuming that the market has also undergone a large loss) as a function of the parameters of...

We present a set of models of the main stylized facts of market price fluctuations. These models comprise dynamical evolution with threshold dynamics and Langevin price equation with multiplicative noise, percolation models to describe the interaction between traders and hierarchical cascade...

A large consensus now seems to take for granted that the distributions of empirical returns of financial time series are regularly varying, with a tail exponent close to 3. We revisit this results and use standard tests as well as develop a battery of new non-parametric and parametric tests (in...

Econophysics embodies the recent upsurge of interest by physicists into financial economics, driven by the availability of large amount of data, job shortage in physics and the possibility of applying many-body techniques developed in statistical and theoretical physics to the understanding of...

Based on a recent theorem due to the authors, it is shown how the extreme tail dependence between an asset and a factor or index or between two assets can be easily calibrated. Portfolios constructed with stocks with minimal tail dependence with the market exhibit a remarkable degree of...

In the aftermath of the burst of the ``new economy'' bubble in 2000, the Federal Reserve aggressively reduced short-term rates yields in less than two years from 6.5% to 1.25% in an attempt to coax forth a stronger recovery of the US economy. But, there is growing apprehension that this is...

Starting from the characterization of the past time evolution of market prices in terms of two fundamental indicators, price velocity and price acceleration, we construct a general classification of the possible patterns characterizing the deviation or defects from the random walk market state...

We clarify the status of log-periodicity associated with speculative bubbles preceding financial crashes. In particular, we address Feigenbaum's [2001] criticism and show how it can be rebuked. Feigenbaum's main result is as follows: ``the hypothesis that the log-periodic component is present in...

Are large scale research programs that include many projects more productive than smaller ones with fewer projects? This problem of economy of scale is particularly relevant for understanding recent mergers in particular in the pharmaceutical industry. We present a quantitative theory based on...

We investigate the relative information content of six measures of dependence between two random variables $X$ and $Y$ for large or extreme events for several models of interest for financial time series. The six measures of dependence are respectively the linear correlation $\rho^+_v$ and...