Deterministic Chaos
The origin of complexity
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Rising Systemic Risk in Banking
The rapid, sustained rise in loans from banks to non-depository financial institutions (NDFIs) — which grew at a 21.9% compound annual rate from 2010 to 2024 — increases systemic risk by creating intense interdependencies. These exposures, particularly through credit lines, can act as transmission channels for financial distress, as bank stability becomes directly tied to…
US Regional Banks at Ground Zero of the Hormuz Commodity Shocks
With the greatest global commodity shock dynamic propagating, it’s timely to examine the banking landscape at the water’s edge just before the tsunami sweeps in. Per FDIC, the banking industry’s loss provision expense was $20.8 billion in the third quarter 2025, down $9.2 billion QoQ mostly due to Capital One’s acquisition of Discover Financial Services.…
“Too Connected to Fail”: Network Portfolio Construction
Abstract: Citation: Diversification is the cornerstone of risk-adjusted portfolio construction. Yet, despite being a well-established principle in finance, diversification has been overlooked in pairs trading strategies, which often focus solely on selecting the most cointegrated pairs in isolation from the broader market structure and without accounting for their combined behavior within a portfolio. Here, we…
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Econophysics2020 