Raffaele Zenti

Volatility, decision models and complexity in financial markets

Are you already subscribed?
Login to check whether this content is already included on your personal or institutional subscription.


Financial markets can be regarded as a complex system. In recent years, financial markets experienced several global crisis and structural changes due to greater interdependence among banks and other agents, new technologies, financial innovations and deregulation, and increasing availability of financial information. Although it is arguable that financial crisis are typical emergent phenomena of a complex system such as the financial system, over the past two decades we witnessed an increasing level of systemic risk, alongside a much higher frequency of episodes of turbulence. These stylized facts are quite apparent analyzing the frequency of exceptional volatility spikes, the intensity of the tail dependence among financial assets, the entropy level, and the degree of interdependence among agents. There are a number of reasons behind that, including decision models commonly used in financial markets. Among them, there are many organizational processes and decision models commonly used by policy makers, regulators, and single firms when approaching risk management and managers' incentives. Even if financial markets are structurally prone to crashes and panics due to their complex nature, improving current policies and decision models explicitly recognizing their complexity, i.e. «thinking in systems », might strengthen the capacity to cope with financial crisis, thus reducing systemic risk.


  • Financial Markets
  • Complexity
  • Systemic Risk
  • Financial Crisis
  • Tail Events


Article first page

Trova nel catalogo di Worldcat