Market Crises-Can the Physics of Phase Transitions and Symmetry Breaking Tell Us Anything Useful?

Journal Of Investment Management (JOIM), Third Quarter 2009

Posted: 13 Oct 2009 Last revised: 19 Oct 2010

Date Written: October 7, 2009

Abstract

This paper addresses aspects of the current financial market crisis by drawing analogies from the physics of phase transitions. If such an analogy is indeed appropriate, then the evolving dynamics of financial markets might have characteristics that the traditional models of finance will not be able to handle, requiring the need for a fresh perspective on modeling and investment decision making.

Keywords: Tail risk, liquidity crisis, systemic risk, phase transitions, arbitrage

JEL Classification: G00

Suggested Citation

Bhansali, Vineer, Market Crises-Can the Physics of Phase Transitions and Symmetry Breaking Tell Us Anything Useful? (October 7, 2009). Journal Of Investment Management (JOIM), Third Quarter 2009. Available at SSRN: https://ssrn.com/abstract=1484919

Vineer Bhansali (Contact Author)

LongTail Alpha, LLC ( email )

500 Newport Center Drive
Suite 820
Newport Beach, CA 92660
United States

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