Causal cascade in the stock market from the ``infrared'' to the ``ultraviolet''

Modelling accurately financial price variations is an essential step underlying portfolio allocation optimization, derivative pricing and hedging, fund management and trading. The observed complex price fluctuations guide and constraint our theoretical understanding of agent interactions and of the organization of the market. The gaussian paradigm of independent normally distributed price increments has long been known to be incorrect with many attempts to improve it. Econometric nonlinear autoregressive models with conditional heteroskedasticity (ARCH) and their generalizations capture only imperfectly the volatility correlations and the fat tails of the probability distribution function (pdf) of price variations. Moreover, as far as changes in time scales are concerned, the so-called ``aggregation'' properties of these models are not easy to control. More recently, the leptokurticity of the full pdf was described by a truncated ``additive'' L\'evy flight model (TLF). Alternatively, Ghashghaie et al. proposed an analogy between price dynamics and hydrodynamic turbulence. In this letter, we use wavelets to decompose the volatility of intraday (S&P500) return data across scales. We show that when investigating two-points correlation functions of the volatility logarithms across different time scales, one reveals the existence of a causal information cascade from large scales (i.e. small frequencies, hence to vocable ``infrared'') to fine scales (``ultraviolet''). We quantify and visualize the information flux across scales. We provide a possible interpretation of our findings in terms of market dynamics.Comment: 9 pages, 3 figure

Fractal Dimensionof the El Salvador Earthquake (2001) time Series

We have estimated multifractal spectrum of the El Salvador earthquake signal recorded at different locations.Comment: multifractal analysi

A multifractal random walk

We introduce a class of multifractal processes, referred to as Multifractal Random Walks (MRWs). To our knowledge, it is the first multifractal processes with continuous dilation invariance properties and stationary increments. MRWs are very attractive alternative processes to classical cascade-like multifractal models since they do not involve any particular scale ratio. The MRWs are indexed by few parameters that are shown to control in a very direct way the multifractal spectrum and the correlation structure of the increments. We briefly explain how, in the same way, one can build stationary multifractal processes or positive random measures.Comment: 5 pages, 4 figures, uses RevTe

Wavelet transform modulus maxima based fractal correlation analysis

The wavelet transform modulus maxima (WTMM) used in the singularity analysis of one fractal function is extended to study the fractal correlation of two multifractal functions. The technique is developed in the framework of joint partition function analysis (JPFA) proposed by Meneveau et al. [1] and is shown to be equally effective. In addition, we show that another leading approach developed for the same purpose, namely, relative multifractal analysis, can be considered as a special case of JPFA at a particular parameter setting.Comment: 18 pgs, 5 fig

Correlated disordered interactions on Potts models

Using a weak-disorder scheme and real-space renormalization-group techniques, we obtain analytical results for the critical behavior of various q-state Potts models with correlated disordered exchange interactions along d1 of d spatial dimensions on hierarchical (Migdal-Kadanoff) lattices. Our results indicate qualitative differences between the cases d-d1=1 (for which we find nonphysical random fixed points, suggesting the existence of nonperturbative fixed distributions) and d-d1>1 (for which we do find acceptable perturbartive random fixed points), in agreement with previous numerical calculations by Andelman and Aharony. We also rederive a criterion for relevance of correlated disorder, which generalizes the usual Harris criterion.Comment: 8 pages, 4 figures, to be published in Physical Review

Uncovering latent singularities from multifractal scaling laws in mixed asymptotic regime. Application to turbulence

In this paper we revisit an idea originally proposed by Mandelbrot about the possibility to observe ``negative dimensions'' in random multifractals. For that purpose, we define a new way to study scaling where the observation scale $\tau$ and the total sample length $L$ are respectively going to zero and to infinity. This ``mixed'' asymptotic regime is parametrized by an exponent $\chi$ that corresponds to Mandelbrot ``supersampling exponent''. In order to study the scaling exponents in the mixed regime, we use a formalism introduced in the context of the physics of disordered systems relying upon traveling wave solutions of some non-linear iteration equation. Within our approach, we show that for random multiplicative cascade models, the parameter $\chi$ can be interpreted as a negative dimension and, as anticipated by Mandelbrot, allows one to uncover the ``hidden'' negative part of the singularity spectrum, corresponding to ``latent'' singularities. We illustrate our purpose on synthetic cascade models. When applied to turbulence data, this formalism allows us to distinguish two popular phenomenological models of dissipation intermittency: We show that the mixed scaling exponents agree with a log-normal model and not with log-Poisson statistics.Comment: 4 pages, 3 figure

Multifractal stationary random measures and multifractal random walks with log-infinitely divisible scaling laws

We define a large class of continuous time multifractal random measures and processes with arbitrary log-infinitely divisible exact or asymptotic scaling law. These processes generalize within a unified framework both the recently defined log-normal Multifractal Random Walk (MRW) [Bacry-Delour-Muzy] and the log-Poisson "product of cynlindrical pulses" [Barral-Mandelbrot]. Our construction is based on some ``continuous stochastic multiplication'' from coarse to fine scales that can be seen as a continuous interpolation of discrete multiplicative cascades. We prove the stochastic convergence of the defined processes and study their main statistical properties. The question of genericity (universality) of limit multifractal processes is addressed within this new framework. We finally provide some methods for numerical simulations and discuss some specific examples.Comment: 24 pages, 4 figure

Wavelet Based Fractal Analysis of Airborne Pollen

The most abundant biological particles in the atmosphere are pollen grains and spores. Self protection of pollen allergy is possible through the information of future pollen contents in the air. In spite of the importance of airborne pol len concentration forecasting, it has not been possible to predict the pollen concentrations with great accuracy, and about 25% of the daily pollen forecasts have resulted in failures. Previous analysis of the dynamic characteristics of atmospheric pollen time series indicate that the system can be described by a low dimensional chaotic map. We apply the wavelet transform to study the multifractal characteristics of an a irborne pollen time series. We find the persistence behaviour associated to low pollen concentration values and to the most rare events of highest pollen co ncentration values. The information and the correlation dimensions correspond to a chaotic system showing loss of information with time evolution.Comment: 11 pages, 7 figure