Clarifications to questions and criticisms on the Johansen–Ledoit–Sornette financial bubble model

The Johansen–Ledoit–Sornette (JLS) model of rational expectation bubbles with finite-time singular crash hazard rates has been developed to describe the dynamics of financial bubbles and crashes. It has been applied successfully to a large variety of financial bubbles in many different markets. Having been developed over a decade ago, the JLS model has been studied, analyzed, used and criticized by several researchers. Much of this discussion is helpful for advancing the research. However, several serious misconceptions seem to be present within this literature both on theoretical and empirical aspects. Several of these problems stem from the fast evolution of the literature on the JLS model and related works. In the hope of removing possible misunderstanding and of catalyzing useful future developments, we summarize these common questions and criticisms concerning the JLS model and synthesize the current state of the art and existing best practice.     

Leverage bubble

Leverage is strongly related to liquidity in a market and lack of liquidity is considered a cause and/or consequence of the recent financial crisis. A repurchase agreement is a financial instrument where a security is sold simultaneously with an agreement to buy it back at a later date. Repurchase agreement (repo) market size is a very important element in calculating the overall leverage in a financial market. Therefore, studying the behavior of repo market size can help to understand a process that can contribute to the birth of a financial crisis. We hypothesize that herding behavior among large investors led to massive over-leveraging through the use of repos, resulting in a bubble (built up over the previous years) and subsequent crash in this market in early 2008. We use the Johansen–Ledoit–Sornette (JLS) model of rational expectation bubbles and behavioral finance to study the dynamics of the repo market that led to the crash. The JLS model qualifies a bubble by the presence of characteristic patterns in the price dynamics, called log-periodic power law (LPPL) behavior. We show that there was significant LPPL behavior in the market before that crash and that the predicted range of times predicted by the model for the end of the bubble is consistent with the observations.     

A stable and robust calibration scheme of the log-periodic power law model

We present a simple transformation of the formulation of the log-periodic power law formula of the Johansen–Ledoit–Sornette (JLS) model of financial bubbles that reduces it to a function of only three nonlinear parameters. The transformation significantly decreases the complexity of the fitting procedure and improves its stability tremendously because the modified cost function is now characterized by good smooth properties with in general a single minimum in the case where the model is appropriate to the empirical data. We complement the approach with an additional subordination procedure that slaves two of the nonlinear parameters to the most crucial nonlinear parameter, the critical time _tc$t_c$, defined in the JLS model as the end of the bubble and the most probable time for a crash to occur. This further decreases the complexity of the search and provides an intuitive representation of the results of the calibration. With our proposed methodology, metaheuristic searches are not longer necessary and one can resort solely to rigorous controlled local search algorithms, leading to a dramatic increase in efficiency. Empirical tests on the Shanghai Composite index (SSE) from January 2007 to March 2008 illustrate our findings.     

A dual passive cavitation detector for localized detection of lithotripsy-induced cavitation in vitro

A passive cavitation detector (PCD) identifies cavitation events by sensing acoustic emissions generated by the collapse of bubbles. In this work, a dual passive cavitation detector (dual PCD), consisting of a pair of orthogonal confocal receivers, is described for use in shock wave lithotripsy. Cavitation events are detected by both receivers and can be localized to within 5 mm by the nature of the small intersecting volume of the focal areas of the two receivers in association with a coincidence detection algorithm. A calibration technique, based on the impulse response of the transducer, was employed to estimate radiated pressures at collapse near the bubble. Results are presented for the in vitro cavitation fields of both a clinical and a research electrohydraulic lithotripter. The measured lifetime of the primary growth-and-collapse of the cavitation bubbles increased from 180 to 420 microseconds as the power setting was increased from 12 to 24 kV. The measured lifetime compared well with calculations based on the Gilmore-Akulichev formulation for bubble dynamics. The radiated acoustic pressure 10 mm from the collapsing cavitation bubble was measured to vary from 4 to 16 MPa with increasing power setting; although the trends agreed with calculations, the predicted values were four times larger than measured values. The axial length of the cavitation field correlated well with the 6-dB region of the acoustic field. However, the width of the cavitation field (10 mm) was significantly narrower than the acoustic field (25 mm) as bubbles appeared to be drawn to the acoustic axis during the collapse. The dual PCD also detected signals from "rebounds," secondary and tertiary growth-and-collapse cycles. The measured rebound time did not agree with calculations from the single-bubble model. The rebounds could be fitted to a Rayleigh collapse model by considering the entire bubble cloud as an effective single bubble. The results from the dual PCD agreed well with images from high-speed photography. The results indicate that single-bubble theory is sufficient to model lithotripsy cavitation dynamics up to time of the main collapse, but that upon collapse bubble cloud dynamics becomes important.     

Cavitation induced by explosion in an ideal fluid model

We discuss the problem of an explosion in the cubic-quintic superfluid model, in relation to some experimental observations. We show numerically that an explosion in such a model might induce a cavitation bubble for large enough energy. This gives a consistent view for rebound bubbles in superfluid and we identify the loss of energy between the successive rebounds as radiated waves. We compute self-similar solution of the explosion for the early stage, when no bubbles have been nucleated. The solution also gives the wave number of the excitations emitted through the shock wave.     

On the multinomial logit model

We show that the Multinomial Logit model of bounded rational choice can be derived in the same way as the Gibbs–Boltzmann distribution in statistical physics. In particular, this model describes the behavior of a thermodynamic agent (which is an agent whose utility function depends on a very large number of variables) with respect to a small subset of variables “weakly interacting” with the others. We also show that the same model is obtained if entropic control costs or information costs are introduced, in which case the temperature like parameter can be considered as the price of (negative) entropy.     

Crash Diagnosis and Price Rebound Prediction in NYSE Composite Index Based on Visibility Graph and Time-Evolving Stock Correlation Network

This study proposes a framework to diagnose stock market crashes and predict the subsequent price rebounds. Based on the observation of anomalous changes in stock correlation networks during market crashes, we extend the log-periodic power-law model with a metric that is proposed to measure network anomalies. To calculate this metric, we design a prediction-guided anomaly detection algorithm based on the extreme value theory. Finally, we proposed a hybrid indicator to predict price rebounds of the stock index by combining the network anomaly metric and the visibility graph-based log-periodic power-law model. Experiments are conducted based on the New York Stock Exchange Composite Index from 4 January 1991 to 7 May 2021. It is shown that our proposed method outperforms the benchmark log-periodic power-law model on detecting the 12 major crashes and predicting the subsequent price rebounds by reducing the false alarm rate. This study sheds light on combining stock network analysis and financial time series modeling and highlights that anomalous changes of a stock network can be important criteria for detecting crashes and predicting recoveries of the stock market.     

Observations of the collapses and rebounds of millimeter-sized lithotripsy bubbles

Bubbles excited by lithotripter shock waves undergo a prolonged growth followed by an inertial collapse and rebounds. In addition to the relevance for clinical lithotripsy treatments, such bubbles can be used to study the mechanics of inertial collapses. In particular, both phase change and diffusion among vapor and noncondensable gas molecules inside the bubble are known to alter the collapse dynamics of individual bubbles. Accordingly, the role of heat and mass transport during inertial collapses is explored by experimentally observing the collapses and rebounds of lithotripsy bubbles for water temperatures ranging from 20 to 60 °C and dissolved gas concentrations from 10 to 85% of saturation. Bubble responses were characterized through high-speed photography and acoustic measurements that identified the timing of individual bubble collapses. Maximum bubble diameters before and after collapse were estimated and the corresponding ratio of volumes was used to estimate the fraction of energy retained by the bubble through collapse. The rebounds demonstrated statistically significant dependencies on both dissolved gas concentration and temperature. In many observations, liquid jets indicating asymmetric bubble collapses were visible. Bubble rebounds were sensitive to these asymmetries primarily for water conditions corresponding to the most dissipative collapses.     

Bounded rational expectations and the stability of interest rate policy

The New Keynesian model has recently been subject to two serious criticisms: the model cannot produce plausible inflation and output dynamics following a monetary shock, and the stability of its dynamics suffers from indeterminacy. The procedures that have been proposed to eliminate these two shortcomings fall into two categories: the introduction of some sort of backward price indexation into the standard model and/or other forms of stickiness (like sticky information); and the adoption of some form of policy rule that completely offsets the effects of forward looking dynamics in the optimization process. In this paper we do not eradicate forward looking behavior from the dynamics of the New Keynesian model, neither do we impose some form of backward price indexation. We assume that private economic agents have forward looking behavior and that they do try to optimize with all available information; the only novelty is that they are allowed to make small mistakes near the rational expectations equilibrium, in a fully deterministic setup. These “near rational” or “bounded rational” expectations show that the dynamics of the model with active interest rate rules is much richer than the simple problem of local indeterminacy as is usually found in the literature.     

The subtle nature of financial random walks

We first review the most important "stylized facts" of financial time series, that turn out to be, to a large extent, universal. We then recall how the multifractal random walk of Bacry, Muzy, and Delour generalizes the standard model of financial price changes and accounts in an elegant way for many of their empirical properties. In a second part, we provide empirical evidence for a very subtle compensation mechanism that underlies the random nature of price changes. This compensation drives the market close to a critical point, that may explain the sensitivity of financial markets to small perturbations, and their propensity to enter bubbles and crashes. We argue that the resulting unpredictability of price changes is very far from the neoclassical view that markets are informationally efficient.     

Hyperbolic prisms and foams in Hele-Shaw cells

The propagation of light in foams creates patterns which are generated due to the reflection and refraction of light. One of these patterns is observed by the formation of multiple mirror images inside liquid bridges in a layer of bubbles in a Hele-Shaw cell. We are presenting the existence of these patterns in foams and their relation with hyperbolic geometry and Sierpinski gaskets using the Poincaré disk model. The images obtained from the experiment in foams are compared to the case of hyperbolic optical elements.     

A new pressure formulation for gas-compressibility dampening in bubble dynamics models

We formulated a pressure equation for bubbles performing nonlinear radial oscillations under ultrasonic high pressure amplitudes. The proposed equation corrects the gas pressure at the gas–liquid interface on inertial bubbles. This pressure formulation, expressed in terms of gas-Mach number, accounts for dampening due to gas compressibility during the violent collapse of cavitation bubbles and during subsequent rebounds. We refer to this as inhomogeneous pressure, where the gas pressure at the gas–liquid interface can differ to the pressure at the centre of the bubble, in contrast to homogenous pressure formulations that consider that pressure inside the bubble is spatially uniform from the wall to the centre. The pressure correction was applied to two bubble dynamic models: the incompressible Rayleigh–Plesset equation and the compressible Keller and Miksis equation. This improved the predictions of the nonlinear radial motion of the bubble vs time obtained with both models. Those simulations were also compared with other bubble dynamics models that account for liquid and gas compressibility effects. It was found that our corrected models are in closer agreement with experimental data than alternative models. It was concluded that the Rayleigh–Plesset family of equations improve accuracy by using our proposed pressure correction.     

Quantum noise in the mirror–field system: A field theoretic approach

We revisit the quantum noise problem in the mirror–field system by a field-theoretic approach. Here a perfectly reflecting mirror is illuminated by a single-mode coherent state of the massless scalar field. The associated radiation pressure is described by a surface integral of the stress-tensor of the field. The read-out field is measured by a monopole detector, from which the effective distance between the detector and mirror can be obtained. In the slow-motion limit of the mirror, this field-theoretic approach allows to identify various sources of quantum noise that all in all leads to uncertainty of the read-out measurement. In addition to well-known sources from shot noise and radiation pressure fluctuations, a new source of noise is found from field fluctuations modified by the mirror’s displacement. Correlation between different sources of noise can be established in the read-out measurement as the consequence of interference between the incident field and the field reflected off the mirror. In the case of negative correlation, we found that the uncertainty can be lowered than the value predicted by the standard quantum limit. Since the particle-number approach is often used in quantum optics, we compared results obtained by both approaches and examine its validity. We also derive a Langevin equation that describes the stochastic dynamics of the mirror. The underlying fluctuation–dissipation relation is briefly mentioned. Finally we discuss the backreaction induced by the radiation pressure. It will alter the mean displacement of the mirror, but we argue this backreaction can be ignored for a slowly moving mirror.     

变形镜驱动器参数自动标定系统的设计

变形镜驱动器各通道的offset参数和gain参数直接影响到变形镜驱动器输出电压的精度,采用人工方式对其进行标定,不仅效率低,费时费力,而且参数的一致性也无法得到保证。为此,首先设计了AD采集器,其内部仅含一片24bit的高精度AD采集芯片,其并行的16端子输入接口通过继电器与采集芯片相连,内含的微处理器负责完成输入通道切换、采集时序控制和采集数据上传等功能;同时,还设计了上位机应用程序,实现了对变形镜驱动器以及AD采集器通信链路检查、标定过程控制参数设置、采集通道切换以及数据处理等相关操作命令和状态数据的收发,使得变形镜驱动器、AD采集器和上位机组成一套驱动器参数自动标定系统。结果表明,该系统不仅使得一套变形镜驱动器参数标定时间由原来的两个工作日缩短到2小时左右,而且提高了参数标定精度和一致性,其96通道零电压的最大误差由18.2mV降为13.5mV,均方差由原来的6.2mV降低为4.3mV,其输出最高电压120.000V的最大误差由23.4mV降为17.5mV,均方差由原来的10.1mV降低为8.3mV。     

腔镜热变形对非稳腔光场特性的影响

 研究了高功率气体激光器中谐振腔腔镜热变形效应。采用时间离散化方法,利用虚共焦折叠非稳腔3维物理光学负载模型和ANSYS热效应计算程序,将光腔稳态模式的快变过程与镜面变形的慢变过程耦合起来,研究了真实器件的腔镜变形和光场模式的相互作用;计算给出了16 s热变形下硅镜和石英镜面输出功率的下降程度和远场光束质量的退变程度：在16 s热效应下,硅镜实际光斑半径与理想光斑半径的比值变化小于1.5,而石英镜值变化达到4,可知长时运行下选用硅镜明显优越于选用石英镜。     

Measurements of bubbles in sea water by nonstationary sound scattering

Methods for the characterization of bubbles in sea water by acoustic scattering are analyzed. Nonstationary linear and nonlinear sound scattering methods are proposed. The transient linear and nonlinear sound scattering allows the scattering by resonant gas bubbles to be distinguished from the scattering by other microinhomogeneities. The application of parametric arrays in oceanic experiments, together with the broadband frequency analysis of the backscattering coefficient, allows information about bubbles in sea water to be obtained. Experimental results on sound scattering and gas bubble distribution functions are presented for different conditions in the ocean.     

Numerical Simulation of Self-Pumped Phase Conjugate Plane--Curve Loop Mirror Based on Photorefractive Nonlinearity

We deal with computer simulation of a transient process in a self-pumped phase conjugate plane-curve loop mirror based on BaTiO3. In optimal circumstances the nonlinear reflectivity and fidelity of such a mirror respectively achieve 0.80-0.90 and 0.95-0.98. The generation of conjugate wave-front occurs due to scattering from the dynamic hologram which is produced in the region of self-intersection of forward and backward beams. In such a model the scenario of passing to unstable generation regimes is similar to the self-pumped phase conjugate plane-plane loop mirror and substantially differs from a single-crystal double phase conjugate mirror.     

软x射线平面镜不同掠射角下的反射率标定

报道了平面反射镜在不同掠射角下的反射率标定实验.实验利用北京同步辐射装置(BSRF)-3W1B束线及反射率计靶室，在束流强度40—120 mA、贮存环电子能量2 GeV专用光运行模式下，在50—1500 eV能区，做了四种材料平面镜在不同掠射角下的反射率标定.标定过程用高灵敏度无死层的硅光二极管代替x射线二极管作探测器，使输出信号提高2—3个数量级.最终给出C，Si，Ni和Au四种材料平面镜在1°—7°掠射角下的反射率标定曲线，并把实验数据与理论计算值进行了比对和分析. 关键词： 同步辐射 平面镜 反射率 标定     

Modelling of a Nd:YAG laser Q-switched by a scanning interferometric mirror

We have modelled a continuously pumped Nd:YAG actively Q-switched by a variable interferometric mirror made up of a scanning Michelson or Fabry-Pérot mirror. We have characterised the three-mirror laser dynamics by using a bifurcation diagram constructed from the plot of peak power-enhancement factor as a function of mirror speed. One observes different chaotic windows separated by period-doubling bifurcations, and stable periodic regime. It is demonstrated that the best performance of the Q-switched laser is obtained rather for low than for high mirror speed (pulse width of 20 ns, and high peak power up to 400 times greater than the continuous emission).