Paper: CCSS-10-001

Title: Disorder-induced volatility of collective dynamics

Authors: Georges Harras*, Claudio J. Tessone, Didier Sornette

Abstract:

``Disorder-induced volatility'' (DIV) describes the enhanced fluctuations of collective behaviors exhibited by bistable systems in the presence of a rapidly fluctuating external signal. At the DIV resonance, a defining characteristics is that the response of the system becomes uncorrelated with the external driving noise, making DIV resonance different from stochastic resonance. Numerical simulations and an analytical theory of a stochastic dynamical version of the Ising model on regular and random networks demonstrate the ubiquity and robustness of DIV, which is proposed as a possible cause of excess volatility in financial markets, of enhanced effective temperatures in a variety of out-of-equilibrium systems and of strong selective responses of immune systems of complex biological organisms.

Keywords: volatility, stochastic processes, financial markets

Manuscript status: Submitted

JEL codes:
PACS numbers: 05.40.-a,89.65.-s

Local copy of the paper: CCSS-10-001.pdf

Submission date: 14-4-2010