Financial markets' deterministic aspects modeled by a low-dimensional equation

Data-driven classification of ligand unbinding pathways

Studying the pathways of ligand-receptor binding is essential to understand the mechanism of target recognition by small molecules. The binding free energy and kinetics of protein-ligand complexes can be computed using molecular dynamics (MD) simulations, often in quantitative agreement with experiments. However, only a qualitative picture of the ligand binding/unbinding paths can be obtained through a conventional analysis of the MD trajectories. Besides, the higher degree of manual effort involved in analyzing pathways limits its applicability in large-scale drug discovery. Here, we address this limitation by introducing an automated approach for analyzing molecular transition paths with a particular focus on protein-ligand dissociation. Our method is based on the dynamic time-warping algorithm, originally designed for speech recognition. We accurately classified molecular trajectories using a very generic descriptor set of contacts or distances. Our approach outperforms manual classification by distinguishing between parallel dissociation channels, within the pathways identified by visual inspection. Most notably, we could compute exit-path-specific ligand-dissociation kinetics. The unbinding timescale along the fastest path agrees with the experimental residence time, providing a physical interpretation to our entirely data-driven protocol. In combination with appropriate enhanced sampling algorithms, this technique can be used for the initial exploration of ligand-dissociation pathways as well as for calculating path-specific thermodynamic and kinetic properties.

Expecting the Unexpected: Entropy and Multifractal Systems in Finance

Entropy serves as a measure of chaos in systems by representing the average rate of information loss about a phase point's position on the attractor. When dealing with a multifractal system, a single exponent cannot fully describe its dynamics, necessitating a continuous spectrum of exponents, known as the singularity spectrum. From an investor's point of view, a rise in entropy is a signal of abnormal and possibly negative returns. This means he has to expect the unexpected and prepare for it. To explore this, we analyse the New York Stock Exchange (NYSE) U.S. Index as well as its constituents. Through this examination, we assess their multifractal characteristics and identify market conditions (bearish/bullish markets) using entropy, an effective method for recognizing fluctuating fractal markets. Our findings challenge conventional beliefs by demonstrating that price declines lead to increased entropy, contrary to some studies in the literature that suggest that reduced entropy in market crises implies more determinism. Instead, we propose that bear markets are likely to exhibit higher entropy, indicating a greater chance of unexpected extreme events. Moreover, our study reveals a power-law behaviour and indicates the absence of variance.

Modeling COVID-19 pandemic with financial markets models: The case of Jaén (Spain)

The main objective of this work is to test whether some stochastic models typically used in financial markets could be applied to the COVID-19 pandemic. To this end, we have implemented the ARIMAX and Cox-Ingersoll-Ross (CIR) models originally designed for interest rate pricing but transformed by us into a forecasting tool. For the latter, which we denoted CIR*, both the Euler-Maruyama method and the Milstein method were used. Forecasts obtained with the maximum likelihood method have been validated with 95% confidence intervals and with statistical measures of goodness of fit, such as the root mean square error (RMSE). We demonstrate that the accuracy of the obtained results is consistent with the observations and sufficiently accurate to the point that the proposed CIR* framework could be considered a valid alternative to the classical ARIMAX for modelling pandemics.

Exploiting deterministic features in apparently stochastic data

Many processes in nature are the result of many coupled individual subsystems (like population dynamics or neurosystems). Not always such systems exhibit simple stable behaviors that in the past science has mostly focused on. Often, these systems are characterized by bursts of seemingly stochastic activity, interrupted by quieter periods. The hypothesis is that the presence of a strong deterministic ingredient is often obscured by the stochastic features. We test this by modeling classically stochastic considered real-world data from both, the stochastic as well as the deterministic approaches to find that the deterministic approach's results level with those from the stochastic side. Moreover, the deterministic approach is shown to reveal the full dynamical systems landscape, which can be exploited for steering the dynamics into a desired regime.

Replication in Energy Markets: Use and Misuse of Chaos Tools

As pointed out by many researchers, replication plays a key role in the credibility of applied sciences and the confidence in all research findings. With regard, in particular, to energy finance and economics, replication papers are rare, probably because they are hampered by inaccessible data, but their aim is crucial. We consider two ways to avoid misleading results on the ostensible chaoticity of price series. The first one is represented by the proper mathematical definition of chaos and the related theoretical background, while the latter is represented by the hybrid approach that we propose here—i.e., consisting of considering the dynamical system underlying the price time series as a deterministic system with noise. We find that both chaotic and stochastic features coexist in the energy commodity markets, although the misuse of some tests in the established practice in the literature may say otherwise.