Understanding Changes in the Topology and Geometry of Financial Market Correlations during a Market Crash.

ABSTRACT: In econophysics, the achievements of information filtering methods over the past 20 years, such as the minimal spanning tree (MST) by Mantegna and the planar maximally filtered graph (PMFG) by Tumminello et al., should be celebrated. Here, we show how one can systematically improve upon this paradigm along two separate directions. First, we used topological data analysis (TDA) to extend the notions of nodes and links in networks to faces, tetrahedrons, or k-simplices in simplicial complexes. Second, we used the Ollivier-Ricci curvature (ORC) to acquire geometric information that cannot be provided by simple information filtering. In this sense, MSTs and PMFGs are but first steps to revealing the topological backbones of financial networks. This is something that TDA can elucidate more full

SUBMITTER: Yen PT 

PROVIDER: S-EPMC8467365 | biostudies-literature | 2021 Sep

REPOSITORIES: biostudies-literature