Control Systems Identification In Finance
And Economics
Author(s)
O. Criner
Abstract
The research program that views economies as complex dynamic systems has
received significant development over the past several decades and has become
known as \“Complexity Economics”. The amount of information that economies
create has grown exponentially. Most markets on formal exchanges have become
electronic and they are consolidating into new organizational structures. The data
from worldwide economic activity are widely available. However, the methods
of analysis and interpretation of these data have not kept pace.
Everyday hundreds of parameters are reported by corporations, governmental
and nongovernmental agencies. Corporations make their earnings reports,
financial events, and other information available. This flood of information is
continuously analyzed in the various media. However, the effect of this influence
is subject to varied interpretation.
The research reported here seeks to define a method by which to quantify this
influence using several globally-traded financial instruments. The methodology
applies data analysis techniques analogous to those used for control of dynamical
systems and links the response of trading activity to reports of economic activity.
The important issues are (1) identification of the reports that have significant
effect on trading activities in specific markets, and (2) determination of the
extent, magnitude, and duration of the influence.
We design a computational dynamical systems model from the derivatives of
the market prices and use the external economic data as driving functions on the
dynamical system. We explore a financial market system model consisting of the
derivatives markets in crude oil, stock indices, and currencies.
Keywords: dynamical systems, financial events, economic indicators, event
trading.
Keywords
dynamical systems, financial events, economic indicators, event
trading.
Related Book
Other papers in this volume
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