Extracting the Multi-Timescale Activity Patterns of Online Financial Markets

Nature Scientific Reports, volume 8, Article number: 11184 (2018)

11 Pages Posted: 4 Feb 2019

See all articles by Teruyoshi Kobayashi

Teruyoshi Kobayashi

Kobe University - Graduate School of Economics

Anna Sapienza

University of Southern California - Information Sciences Institute

Emilio Ferrara

University of Southern California - Information Sciences Institute

Date Written: July 25, 2018

Abstract

Online financial markets can be represented as complex systems where trading dynamics can be captured and characterized at different resolutions and time scales. In this work, we develop a methodology based on non-negative tensor factorization (NTF) aimed at extracting and revealing the multi-timescale trading dynamics governing online financial systems. We demonstrate the advantage of our strategy first using synthetic data, and then on real-world data capturing all interbank transactions (over a million) occurred in an Italian online financial market (e-MID) between 2001 and 2015. Our results demonstrate how NTF can uncover hidden activity patterns that characterize groups of banks exhibiting different trading strategies (normal vs. early vs. flash trading, etc.). We further illustrate how our methodology can reveal “crisis modalities” in trading triggered by endogenous and exogenous system shocks: as an example, we reveal and characterize trading anomalies in the midst of the 2008 financial crisis.

Suggested Citation

Kobayashi, Teruyoshi and Sapienza, Anna and Ferrara, Emilio, Extracting the Multi-Timescale Activity Patterns of Online Financial Markets (July 25, 2018). Nature Scientific Reports, volume 8, Article number: 11184 (2018) . Available at SSRN: https://ssrn.com/abstract=3324608

Teruyoshi Kobayashi

Kobe University - Graduate School of Economics ( email )

2-1, Rokkodai
Nada-Ku
Kobe, Hyogo, 657-8501
Japan

Anna Sapienza

University of Southern California - Information Sciences Institute ( email )

4676 Admiralty Way
Suite 1001
Marina del Rey, CA 90292
United States

Emilio Ferrara (Contact Author)

University of Southern California - Information Sciences Institute ( email )

United States

HOME PAGE: http://emilio.ferrara.name

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