This review presents a general theory of financial crashes and of stock market instabilities
that his co-workers and the author have developed over the past seven years. We start by …

Physicists have recently begun doing research in finance, and even though this movement
is less than five years old, interesting and useful contributions have already emerged. This …

Concepts, methods and techniques of statistical physics in the study of correlated, as well as
uncorrelated, phenomena are being applied ever increasingly in the natural sciences …

We propose a method for optimal portfolio selection using a Bayesian decision theoretic
framework that addresses two major shortcomings of the traditional Markowitz approach: the …

Portfolio analysis and optimization, together with the associated risk assessment and
management, require knowledge of the likely distributions of returns at different time scales …

Using one of the key properties of copulas that they remain invariant under an arbitrary
monotonic change of variable, we investigate the null hypothesis that the dependence …

A large consensus now seems to take for granted that the distributions of empirical returns of
financial time series are regularly varying, with a tail exponent b close to 3. We develop a …

Drawdowns are essential aspects of risk assessment in investment management. They offer
a more natural measure of real market risks than the variance or other cumulants of daily (or …

The Nasdaq Composite fell another% on Friday the 14'th of April 2000 signaling the end of a
remarkable speculative high-tech bubble starting in spring 1997. The closing of the Nasdaq …

Keeping a basic tenet of economic theory, rational expectations, we model the nonlinear
positive feedback between agents in the stock market as an interplay between nonlinearity …