Disorder-Induced Volatility of Collective Dynamics

CCSS Working Paper No. CCSS-10-001

7 Pages Posted: 27 Apr 2010

See all articles by Georges Harras

Georges Harras

affiliation not provided to SSRN

Claudio J. Tessone

ETH Zürich

Didier Sornette

ETH Zürich - Department of Management, Technology, and Economics (D-MTEC); Swiss Finance Institute

Date Written: April 14, 2010

Abstract

``Disorder-induced volatility'' (DIV) describes the enhanced fluctuations of collective behaviors exhibited by bistable systems in the presence of a rapidly fluctuating external signal. At the DIV resonance, a defining characteristics is that the response of the system becomes uncorrelated with the external driving noise, making DIV resonance different from stochastic resonance. Numerical simulations and an analytical theory of a stochastic dynamical version of the Ising model on regular and random networks demonstrate the ubiquity and robustness of DIV, which is proposed as a possible cause of excess volatility in financial markets, of enhanced effective temperatures in a variety of out-of-equilibrium systems and of strong selective responses of immune systems of complex biological organisms.

Keywords: volatility, stochastic processes, financial markets

Suggested Citation

Harras, Georges and Tessone, Claudio J. and Sornette, Didier, Disorder-Induced Volatility of Collective Dynamics (April 14, 2010). CCSS Working Paper No. CCSS-10-001. Available at SSRN: https://ssrn.com/abstract=1596048 or http://dx.doi.org/10.2139/ssrn.1596048

Georges Harras

affiliation not provided to SSRN ( email )

Claudio J. Tessone (Contact Author)

ETH Zürich ( email )

Zürichbergstrasse 18
8092 Zurich, CH-1015
Switzerland

HOME PAGE: http://www.sg.ethz.ch/people/tessonec

Didier Sornette

ETH Zürich - Department of Management, Technology, and Economics (D-MTEC) ( email )

Scheuchzerstrasse 7
Zurich, ZURICH CH-8092
Switzerland
41446328917 (Phone)
41446321914 (Fax)

HOME PAGE: http://www.er.ethz.ch/

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

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