Complexity theory/complex systems in quant finance

[Quavid]

Hey guys,

I know many complexity theory / complex systems approaches in finance from an academic perspective. Are those methods also being used in the financial industry? What can you tell me about it?

 

[Daniel Duffy]

I would say it's more in the CS academic sphere, in general.

Complexity is (was?) about searching and sorting in data structures. Financial is more about maths + algorithms with data structures as side-kick.

 

[Quavid]

I would say it's more in the CS academic sphere, in general.

Complexity is (was?) about searching and sorting in data structures. Financial is more about maths + algorithms with data structures as side-kick.

Actually, researchers of many disciplines are dealing with complex systems and are using specific methods interdisplinarily. Some are dealing with ecosystems, others with financial markets (just to mention two examples). One method, which is common within complexity economics and finance are agent-based models. Of course, this is a rather theoretical approach, which I would be supprised of being used within the industry. But due to the fact that complex systems researchers deal with nonlinear dynamics, systemic risk, etc., it would make sense to me that their methods get applied.

 

[Daniel Duffy]

Actually, researchers of many disciplines are dealing with complex systems and are using specific methods interdisplinarily. Some are dealing with ecosystems, others with financial markets (just to mention two examples). One method, which is common within complexity economics and finance are agent-based models. Of course, this is a rather theoretical approach, which I would be supprised of being used within the industry. But due to the fact that complex systems researchers deal with nonlinear dynamics, systemic risk, etc., it would make sense to me that their methods get applied.

I don't doubt that a lot of work is being done in this area. But my guess is it's not (yet) mainstream business.