Complexity and Criticality in financial markets: systemic risk across frequencies and cross sections

Extreme market events and systemic collapses cause most of the popular attention to finance and financial markets. Extreme phenomena and the dynamics of con- nected/interacting systems have been the subject of financial modeling since early derivatives modeling, exposure risk modeling and portfolio construction. In the present work we discuss how traditional methods have for the most part failed to properly model the interconnected global financial and economic system. This led to systemic risk events and simplistic regulation which does not properly account for its implications. Analogously, we discuss how from as early as Mandelbrot’s works on financial prices and fat tails, academics, practitioners and regulators alike were warned of fat tails in financial modeling and in particular market making and derivatives pricing. The improper modeling or dismissal of these lies at the cen- tre of financial downturns ranging from LTCM’s collapse to the quant downturn of August 2007. The solution I promote in this thesis is that of complexity and criticality. In line with this we propose two lines of work. The former analyses markets as complex networks and their structure through to practical takeaways including a proof of concept for portfolio construction. The latter instead focuses on extreme events in high frequency markets with results for both tail modeling and systemic events and practical insights from those. Recent events have shown how retail investors and their savings are now heavily involved in financial markets. We hope that our contribution of methods of practical use for proper risk modeling will encourage their adoption by practitioners and regulators with the outcome of a more stable and efficient financial system

Heterogeneous criticality in high frequency finance: a phase transition in flash crashes

Flash crashes in financial markets have become increasingly important, attracting attention from financial regulators, market makers as well as from the media and the broader audience. Systemic risk and the propagation of shocks in financial markets is also a topic of great relevance that has attracted increasing attention in recent years. In the present work, we bridge the gap between these two topics with an in-depth investigation of the systemic risk structure of co-crashes in high frequency trading. We find that large co-crashes are systemic in their nature and differ from small ones. We demonstrate that there is a phase transition between co-crashes of small and large sizes, where the former involves mostly illiquid stocks, while large and liquid stocks are the most represented and central in the latter. This suggests that systemic effects and shock propagation might be triggered by simultaneous withdrawals or movement of liquidity by HFTs, arbitrageurs and market makers with cross-asset exposures

Cross-disorder genome-wide analyses suggest a complex genetic relationship between Tourette's syndrome and OCD

Objective: Obsessive-compulsive disorder (OCD) and Tourette's syndrome are highly heritable neurodevelopmental disorders that are thought to share genetic risk factors. However, the identification of definitive susceptibility genes for these etiologically complex disorders remains elusive. the authors report a combined genome-wide association study (GWAS) of Tourette's syndrome and OCD.Method: the authors conducted a GWAS in 2,723 cases (1,310 with OCD, 834 with Tourette's syndrome, 579 with OCD plus Tourette's syndrome/chronic tics), 5,667 ancestry-matched controls, and 290 OCD parent-child trios. GWAS summary statistics were examined for enrichment of functional variants associated with gene expression levels in brain regions. Polygenic score analyses were conducted to investigate the genetic architecture within and across the two disorders.Results: Although no individual single-nucleotide polymorphisms (SNPs) achieved genome-wide significance, the GWAS signals were enriched for SNPs strongly associated with variations in brain gene expression levels (expression quantitative loci, or eQTLs), suggesting the presence of true functional variants that contribute to risk of these disorders Polygenic score analyses identified a significant polygenic component for OCD (p=2x10(-4)), predicting 3.2% of the phenotypic variance in an independent data set. in contrast, Tourette's syndrome had a smaller, nonsignificant polygenic component, predicting only 0.6% of the phenotypic variance (p=0.06). No significant polygenic signal was detected across the two disorders, although the sample is likely underpowered to detect a modest shared signal. Furthermore, the OCD polygenic signal was significantly attenuated when cases with both OCD and co-occurring Tourette's syndrome/chronic tics were included in the analysis (p=0.01).Conclusions: Previous work has shown that Tourette's syndrome and OCD have some degree of shared genetic variation. However, the data from this study suggest that there are also distinct components to the genetic architectures of these two disorders. Furthermore, OCD with co-occurring burette's syndrome/chronic tics may have different underlying genetic susceptibility compared with OCD alone.David Judah FundNIHTourette Syndrome Association International Consortium for GeneticsTourette Syndrome AssociationOCD Collaborative Genetics Association StudyAmerican Academy of Child and Adolescent Psychiatry Early Investigator Research GrantAnxiety Disorders Association of America Junior Investigator Research GrantUniversity of British ColumbiaMichael Smith Foundation Clinical Research Scholar AwardAmerican Recovery and Reinvestment Act awardsUCLA Informatics Center for Neurogenetics and NeurogenomicsNew Jersey Center for Tourette Syndrome and Associated DisordersNIMHMedical Research Council of South AfricaNIH Genes, Environment, and Health Initiative [GEI]Gene Environment Association Studies (GENEVA) under GEL AssistanceGENEVA Coordinating CenterCollaborative Study on the Genetics of AlcoholismCollaborative Genetic Study of Nicotine DependenceFamily Study of Cocaine DependenceNIH GEINational Institute on Alcohol Abuse and AlcoholismNational Institute on Drug AbuseNIH contract High Throughput Genotyping for Studying the Genetic Contributions to Human DiseaseEuropean Union, HYPERGENESInterOmicsTourette Syndrome Association (TSA)Astra-ZenecaPsyadonAstraZenecaOtsukaU.S. national Tourette Syndrome AssociationMedtronicSimons FoundationAllison FoundationGerman Research FoundationFederal Ministry of Education, and Research GermanyGrifotsKlingenstein Third Generation FoundationPfizer Pharmaceuticals via the Duke University Clinical Research Instituteburette Syndrome AssociationPettit Family FoundationMedtronic and CyberonicsU.K. Tourette Syndrome AssociationU.S. Tourette Syndrome AssociationCOST/ESSTS (the European Society for the Study of Tourette Syndrome)RocheAMBRFBiocodexCiplaLundbeckNational Responsible Gambling FoundationNovartisServierSynapDxSeaside TherapeuticsForestPherin PharmaceuticalsTranscept PharmaceuticalsDNA GenotekBioMarinHarvard Univ, Massachusetts Gen Hosp, Sch Med, Ctr Human Genet Res,Dept Psychiat,Psychiat & Neur, Boston, MA 02138 USABroad Inst Harvard & MIT, Stanley Ctr Psychiat Res, Cambridge, MA USAUniv Calif San Francisco, Dept Psychiat, San Francisco, CA USAMassachusetts Gen Hosp, Dept Neurol, Boston, MA 02114 USABrigham & Womens Hosp, Div Cognit & Behav Neurol, Boston, MA 02115 USAMassachusetts Gen Hosp, Analyt & Translat Genet Unit, Boston, MA 02114 USAUniv Chicago, Dept Med, Med Genet Sect, Chicago, IL 60637 USAUniv Amsterdam, Acad Med Ctr, Dept Psychiat, NL-1105 AZ Amsterdam, NetherlandsUniv So Calif, Keck Sch Med, Dept Prevent Med, Div Biostat, Los Angeles, CA 90033 USANIA, Neurogenet Lab, Bethesda, MD 20892 USAFilarete Fdn, Genom & Bioinformat Unit, Milan, ItalyUniv Milan, Dept Hlth Sci, Grad Sch Nephrol, Milan, ItalyUniv Hlth Network, Toronto Western Res Inst, Toronto, ON, CanadaHosp Sick Children, Toronto, ON M5G 1X8, CanadaUniv Vita Salute San Raffaele, Milan, ItalyHadassah Hebrew Univ, Med Ctr, Herman Dana Div Child & Adolescent Psychiat, Jerusalem, IsraelUniv Pontificia Bolivariana, Univ Antioquia, Medellin, ColombiaJohns Hopkins Univ, Sch Med, Dept Psychiat & Behav Sci, Baltimore, MD 21205 USAUniv Iowa, Dept Psychiat, Roy J & Lucille A Carver Coll Med, Iowa City, IA 52242 USAYale Univ, Sch Med, Ctr Child Study, New Haven, CT 06510 USAYale Univ, Sch Med, Dept Psychiat, New Haven, CT USAUniv São Paulo, Sch Med, Dept Psychiat, São Paulo, BrazilNorth Shore Long Isl Jewish Med Ctr, Manhasset, NY USANorth Shore Long Isl Jewish Hlth Syst, Manhasset, NY USANYU, Med Ctr, New York, NY 10016 USAHofstra Univ, Sch Med, Hempstead, NY 11550 USAInst Nacl Psiquiatria Ramon de la Fuente Muniz, Mexico City, DF, MexicoUCL, London, EnglandUniv Hong Kong, Dept Psychiat, Hong Kong, Hong Kong, Peoples R ChinaUniv Milan, Osped San Raffaele, I-20127 Milan, ItalyUniv Calif San Diego, Dept Psychiat, La Jolla, CA 92093 USAUniv Calif Los Angeles, Dept Psychol, Los Angeles, CA 90024 USAMcGill Univ, Montreal Neurol Inst, Montreal, PQ, CanadaUniv Illinois, Dept Psychiat, Inst Juvenile Res, Chicago, IL 60612 USAInst Pasteur, Paris, FranceFrench Natl Sci Fdn, Fdn FondaMental, Creteil, FranceHop Robert Debre, AP HP, Dept Child & Adolescent Psychiat, F-75019 Paris, FranceRoyal Netherlands Acad Arts & Sci, Netherlands Inst Neurosci, Amsterdam, NetherlandsUniv Montreal, Dept Psychiat, Montreal, PQ H3C 3J7, CanadaUniv New S Wales, Sydney, NSW 2052, AustraliaSouth West Sydney Local Hlth Dist AUCS, Acad Unit Child Psychiat, Sydney, NSW, AustraliaUniv Tubingen, Dept Child & Adolescent Psychiat & Psychotherapy, Tubingen, GermanyUniv Wurzburg, Dept Child & Adolescent Psychiat Psychosomat & Ps, D-97070 Wurzburg, GermanyUniv Munich, Dept Psychiat & Psychotherapy, Munich, GermanyHosp Nacl Ninos Dr Carlos Saenz Herrera, San Jose, Costa RicaClin Herrera Amighetti, San Jose, Costa RicaHarvard Univ, Massachusetts Gen Hosp, Sch Med, Dept Psychiat,OCD Program, Boston, MA USACincinnati Childrens Hosp Med Ctr, Cincinnati, OH 45229 USAUniv Cincinnati, Cincinnati, OH USAUniv Med Greffswatd, Hellos Hosp Stralsund, Dept Psychiat & Psychotherapy, Greifswald, GermanyButler Hosp, Brown Med Sch, Dept Psychiat & Human Behav, Providence, RI 02906 USAShaare Zedek Med Ctr, Neuropediat Unit, Jerusalem, IsraelUniv Zurich, Univ Clin Child Psychiat, Zurich, SwitzerlandUniv Zurich, Univ Clin Adolescent Psychiat, Zurich, SwitzerlandRutgers State Univ, Dept Genet, Human Genet Inst New Jersey, Piscataway, NJ USAUniv Stellenbosch, Dept Psychiat, ZA-7600 Stellenbosch, South AfricaUniv Groningen, Univ Med Ctr Groningen, Dept Psychiat, Groningen, NetherlandsBaylor Coll Med, Dept Neurol, Parkinsons Dis Ctr, Houston, TX 77030 USABaylor Coll Med, Dept Neurol, Movement Disorders Clin, Houston, TX 77030 USACtr Addict & Mental Hlth, Neurogenet Sect, Toronto, ON, CanadaUniv Toronto, Dept Psychiat, Toronto, ON, CanadaOverlook Hosp, Atlantic Neurosci Inst, Summit, NJ USACarracci Med Grp, Mexico City, DF, MexicoInst Mondor Rech Biomed, Creteil, FranceUniv Bonn, Dept Psychiat & Psychotherapy, Bonn, GermanyUniv Illinois, Dept Psychiat, Inst Human Genet, Chicago, IL 60612 USAUniv Stellenbosch, Dept Psychiat, MRC Unit Anxiety & Stress Disorders, ZA-7600 Stellenbosch, South AfricaUniv Cape Town, ZA-7700 Rondebosch, South AfricaUniv Calif Irvine, Sch Med, Dept Psychiat & Human Behav, Irvine, CA 92717 USAIRCCS San Raffaele Sci Inst, Milan, ItalyFdn IRCCS CaGranda Osped Maggiore Policlin, Ctr Transfus Med & Immunohematol, Milan, ItalyUniv Calif Los Angeles, David Geffen Sch Med, Dept Psychiat & Biobehav Sci, Los Angeles, CA 90095 USAColumbia Univ, Dept Biol Sci, New York, NY 10027 USAUniv Utah, Salt Lake City, UT USANIMH Intramural Res Program, Clin Sci Lab, Bethesda, MD USAMed City Dallas Hosp, Dept Clin Res, Dallas, TX USAUniv Med Ctr, Rudolf Magnus Inst Neurosci, Dept Psychiat, Utrecht, NetherlandsUniv Calif Los Angeles, Ctr Neurobehav Genet, Semel Inst Neurosci & Human Behav, Los Angeles, CA USAYale Univ, Sch Med, Dept Genet, New Haven, CT 06510 USAUniv So Calif, Keck Sch Med, Zilkha Neurogenet Inst, Dept Psychiat & Behav Sci, Los Angeles, CA 90033 USAPartners Psychiat, Boston, MA USAMcLean Hosp, Boston, MA USASunnybrook Hlth Sci Ctr, Frederick W Thompson Anxiety Disorders Ctr, Toronto, ON M4N 3M5, CanadaSt Georges Hosp & Med Sch, London, EnglandUniversidade Federal de São Paulo, Dept Psychiat, Child & Adolescent Psychiat Unit, São Paulo, BrazilWayne State Univ, Dept Psychiat & Behav Neurosci, Detroit, MI 48207 USADetroit Med Ctr, Detroit, MI USAUniv Cologne, Dept Psychiat & Psychotherapy, D-50931 Cologne, GermanyStanford Univ, Dept Hlth Res & Policy, Stanford, CA 94305 USAUniv Fed Bahia, Univ Hlth Care Serv SMURB, Salvador, BA, BrazilYouthdate Treatment Ctr, Toronto, ON, CanadaJohns Hopkins Univ, Sch Med, Baltimore, MD USAVrije Univ Amsterdam Med Ctr, Dept Psychiat, Amsterdam, NetherlandsUniv Cape Town, ZA-7925 Cape Town, South AfricaUniv Med Ctr Utrecht, Dept Med Genet, Utrecht, NetherlandsUniv Milan, Dept Hlth Technol, Milan, ItalyVanderbilt Univ, Dept Psychiat, Kennedy Ctr Res Human Dev, Nashville, TN 37235 USAVanderbilt Univ, Dept Pediat, Kennedy Ctr Res Human Dev, Nashville, TN USAVanderbilt Univ, Dept Pharmacol, Kennedy Ctr Res Human Dev, Nashville, TN USAVanderbilt Univ, Inst Brain, Nashville, TN USAUniv Wurzburg, Dept Child & Adolescent Psychiat, D-97070 Wurzburg, GermanyWeill Cornell Med Ctr, Dept Psychiat, Div Child & Adolescent Psychiat, New York, NY USAKings Coll London, Dept Med & Mol Genet, London WC2R 2LS, EnglandRoyal Netherlands Acad Arts & Sci, Acad Med Ctr, Dept Psychiat, Amsterdam, NetherlandsNIMH Intramural Res Program, Unit Stat Genom, Bethesda, MD USACarracci Med Grp, Natl Inst Genom Med SAP, Mexico City, DF, MexicoUniv Utrecht, Dept Clin & Hlth Psychol, Utrecht, NetherlandsUniv Utah, Dept Psychiat, Salt Lake City, UT USAVrije Univ Amsterdam Med Ctr, Dept Clin Genet, Sect Med Genom, Amsterdam, NetherlandsVrije Univ Amsterdam, Ctr Neurogen & Cognit Res, Dept Funct Genom, Amsterdam, NetherlandsErasmus Univ, Med Ctr, Dept Child & Adolescent Psychiat, Rotterdam, NetherlandsErasmus Univ, Med Ctr, Dept Clin Genet, Rotterdam, NetherlandsMt Sinai Med Ctr, New York, NY 10029 USAGerman Ctr Neurodegenerat Dis, Tubingen, GermanyUniv Michigan, Dept Psychiat, Ann Arbor, MI 48109 USAHosp Sick Children, Program Genet & Genome Biol, Toronto, ON M5G 1X8, CanadaUniv British Columbia, British Columbia Mental Hlth & Addict Res Inst, Vancouver, BC V5Z 1M9, CanadaUniversidade Federal de São Paulo, Dept Psychiat, Child & Adolescent Psychiat Unit, São Paulo, BrazilNIH: NS40024NIH: NS16648NIH: MH079489NIH: MH073250NIH: NS037484NIH: MH085057NIH: MH079494NIH: MH71507American Recovery and Reinvestment Act awards: NS40024-0751American Recovery and Reinvestment Act awards: NS16648-29S1UCLA Informatics Center for Neurogenetics and Neurogenomics: R01 MH090937UCLA Informatics Center for Neurogenetics and Neurogenomics: P50MH094267UCLA Informatics Center for Neurogenetics and Neurogenomics: P30NS062691NIMH: R01MH092293NIH Genes, Environment, and Health Initiative [GEI]: U01 HG004422GENEVA Coordinating Center: U01 HG004446Collaborative Study on the Genetics of Alcoholism: U10 AA008401Collaborative Genetic Study of Nicotine Dependence: P01 CA089392Family Study of Cocaine Dependence: R01 DA013423NIH GEI: U01HG004438NIH contract High Throughput Genotyping for Studying the Genetic Contributions to Human Disease: HHSN268200782096CEuropean Union, HYPERGENES: FP7-HEALTH-2007-A-201550InterOmics: PB05Web of Scienc