Show simple item record

Endogenous Market Turbulence

dc.creatorTambakis, Demosthenes N
dc.description.abstractIn this paper I study a nonlinear feedback trading model which can generate stable, unstable, turbulent or chaotic asset returns depending on market conditions. The dynamics are driven by the stochastic price impact of net order flow (inverse market liquidity). If price impact grows beyond exogenous threshold values, liquidity dries up and asset returns become turbulent. In the absence of fundamental factors, the occurrence of turbulence and chaos is entirely endogenous. The results highlight the critical role of maintaining stable market-making conditions for averting “liquidity black holes”.
dc.publisherCFAP, Cambridge Judge Business School, University of Cambridge
dc.subjectfeedback trading
dc.subjectstochastic price impact
dc.subjectfinancial stability
dc.subjectnonlinear dynamics
dc.titleEndogenous Market Turbulence
dc.typeWorking Paper

Files in this item


This item appears in the following Collection(s)

Show simple item record