Optimal redundancy against disjoint vulnerabilities in networks

Redundancy is commonly used to guarantee continued functionality in networked systems. However, often many nodes are vulnerable to the same failure or adversary. A "backup" path is not sufficient if both paths depend on nodes which share a vulnerability.For example, if two nodes of the Internet cannot be connected without using routers belonging to a given untrusted entity, then all of their communication-regardless of the specific paths utilized-will be intercepted by the controlling entity.In this and many other cases, the vulnerabilities affecting the network are disjoint: each node has exactly one vulnerability but the same vulnerability can affect many nodes. To discover optimal redundancy in this scenario, we describe each vulnerability as a color and develop a "color-avoiding percolation" which uncovers a hidden color-avoiding connectivity. We present algorithms for color-avoiding percolation of general networks and an analytic theory for random graphs with uniformly distributed colors including critical phenomena. We demonstrate our theory by uncovering the hidden color-avoiding connectivity of the Internet. We find that less well-connected countries are more likely able to communicate securely through optimally redundant paths than highly connected countries like the US. Our results reveal a new layer of hidden structure in complex systems and can enhance security and robustness through optimal redundancy in a wide range of systems including biological, economic and communications networks.Comment: 15 page

Regularities and Irregularities in Order Flow Data

We identify and analyze statistical regularities and irregularities in the recent order flow of different NASDAQ stocks, focusing on the positions where orders are placed in the orderbook. This includes limit orders being placed outside of the spread, inside the spread and (effective) market orders. We find that limit order placement inside the spread is strongly determined by the dynamics of the spread size. Most orders, however, arrive outside of the spread. While for some stocks order placement on or next to the quotes is dominating, deeper price levels are more important for other stocks. As market orders are usually adjusted to the quote volume, the impact of market orders depends on the orderbook structure, which we find to be quite diverse among the analyzed stocks as a result of the way limit order placement takes place.Comment: 10 pages, 9 figure

Spontaneous centralization of control in a network of company ownerships

We introduce a model for the adaptive evolution of a network of company ownerships. In a recent work it has been shown that the empirical global network of corporate control is marked by a central, tightly connected "core" made of a small number of large companies which control a significant part of the global economy. Here we show how a simple, adaptive "rich get richer" dynamics can account for this characteristic, which incorporates the increased buying power of more influential companies, and in turn results in even higher control. We conclude that this kind of centralized structure can emerge without it being an explicit goal of these companies, or as a result of a well-organized strategy.Comment: 5 Pages, 7 figure

Impact and Recovery Process of Mini Flash Crashes: An Empirical Study

In an Ultrafast Extreme Event (or Mini Flash Crash), the price of a traded stock increases or decreases strongly within milliseconds. We present a detailed study of Ultrafast Extreme Events in stock market data. In contrast to popular belief, our analysis suggests that most of the Ultrafast Extreme Events are not primarily due to High Frequency Trading. In at least 60 percent of the observed Ultrafast Extreme Events, the main cause for the events are large market orders. In times of financial crisis, large market orders are more likely which can be linked to the significant increase of Ultrafast Extreme Events occurrences. Furthermore, we analyze the 100 trades following each Ultrafast Extreme Events. While we observe a tendency of the prices to partially recover, less than 40 percent recover completely. On the other hand we find 25 percent of the Ultrafast Extreme Events to be almost recovered after only one trade which differs from the usually found price impact of market orders

Two Price Regimes in Limit Order Books: Liquidity Cushion and Fragmented Distant Field

The distribution of liquidity within the limit order book is essential for the impact of market orders on the stock price and the emergence of price shocks. Hence it is of great interest to improve the understanding of the time-dependent dynamics of the limit order book. In our analysis we find a broad distribution of limit order lifetimes. Around the quotes we find a densely filled regime with mostly short living limit orders, far away from the quotes we find a sparse filling with mostly long living limit orders. We determine the characteristics of those two regimes and point out the main differences. Based on our research we propose a model for simulating the regime around the quotes