Economics and Finance

   

Self-Organized Critical Markets - Implied Volatility and Avalanche Intensity

Authors: Romain Bocher

Assuming self-organized criticality to characterize capital markets, this paper seeks to explain why equity implied volatility is a relevant proxy for avalanche intensity. Historical data analysis of the CBOE Volatility Index (VIX) shows that implied volatility spikes are distributed following a power law, making financial stress similar to earthquakes as anticipated long ago by Bak.

Comments: 7 Pages.

Download: PDF

Submission history

[v1] 2019-12-30 07:47:09
[v2] 2020-01-03 06:50:46
[v3] 2020-01-06 05:08:54

Unique-IP document downloads: 22 times

Vixra.org is a pre-print repository rather than a journal. Articles hosted may not yet have been verified by peer-review and should be treated as preliminary. In particular, anything that appears to include financial or legal advice or proposed medical treatments should be treated with due caution. Vixra.org will not be responsible for any consequences of actions that result from any form of use of any documents on this website.

Add your own feedback and questions here:
You are equally welcome to be positive or negative about any paper but please be polite. If you are being critical you must mention at least one specific error, otherwise your comment will be deleted as unhelpful.

comments powered by Disqus