Financial Market Risk

9 Chaos — nonunique equilibria processes

 

 

 

 

9.1 Introduction

Chaos theory, a modern theory development in mathematics and science, provides a framework for understanding irregular, intermittent and turbulent fluctuations (Gleick, 1987; Lorenz, 2001). Chaotic systems are found in many fields of science and engineering (Hall, 1991; Prigogine, 1997). The study of their dynamics is an essential part of the burgeoning science of complexity (Nicolis and Prigogine, 1998). Complexity science researches the behavior of nonlinear dynamic processes and has now reached advanced financial time series analysis, but mostly in academic circles (Parker and Chua, 1987; Savit, 1988; Abarnel, 1994; Patterson and Ashley, 2000); and, in particular after the stock ...