Organic mechanics – complex networks in finance. FT article

In today’s FT you can find a very interesting article about implementation of complex networks in finance. The article is also an indication that more and more economists became aware that “Efficient Market Hypothesis” does not explain market behavior and that there are better models (i.e George Soros reflexivity or Andrew Lo Adaptive Markets Hypothesis). Full article you can find here

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Risk appetite gets into alarm zone

You don’t need to look at risk appetite indicator (short description of the index you may find here) to know that optimism spreads across markets. But the above attached chart is giving a good visualization of the current market situation. As John Maynard Keynes famously said “Successful investing is anticipating the anticipations of others”. Along this line high risk appetite may be signal that this rally is maturing and soon the optimistic assumptions may be put under test.

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Financialization of Commodity Markets: Nonlinear Consequences from Heterogeneous

Just read quite interesting paper form central bank of Argentina. Authors’ claims that that high discrepancies between spot and fundamental commodities prices tend to be corrected relatively fast, while small misalignments tend to persist over time without any endogenous correcting force taking place. This is quite non-intuitive conclusion. Isn’t it?

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Commodities corner: Sugar futures bubble ready to burst - an update

Over the past few months, sugar has been on accelerating upward spiral, hitting a 28-year high at USD24 cents per pound. On September 1rd In analysis posted on this blog I stated that sugar prices exhibit a “bubble” characteristic. Fitting LPPL model I came to conclusion that bubble get into critical zone. The critical zone describes the maturation of a systemic instability forewarning of an inevitable crash. Since the beginning of September the sugar prices abandoned the „super-exponential” growth pattern and start to widely oscillate which goes along the prediction of the LPPL model

Here you can download a PowerPoint presentation. This presentation is aimed to show a more detailed analysis of the sugar#11 futures contract prediction and the methods used to make and test them. Specifically they are LPPL model, LPPL fitting procedure

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