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Bifurcation patterns of market regime transition

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  • Sergey Kamenshchikov

Abstract

In this paper mechanisms of reversion - momentum transition are considered. Two basic nonlinear mechanisms are highlighted: a slow and fast bifurcation. A slow bifurcation leads to the equilibrium evolution, preceded by stability loss delay of a control parameter. A single order parameter is introduced by Markovian chain diffusion, which plays a role of a precursor. A fast bifurcation is formed by a singular fusion of unstable and stable equilibrium states. The effect of a precatastrophic range compression is observed before the discrete change of a system. A diffusion time scaling is presented as a precursor of the fast bifurcation. The efficiency of both precursors in a currency market was illustrated by simulation of a prototype of a trading system.

Suggested Citation

  • Sergey Kamenshchikov, 2015. "Bifurcation patterns of market regime transition," Papers 1507.03141, arXiv.org, revised Jan 2016.
    • Handle: RePEc:arx:papers:1507.03141
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    1. Sergey A. Kamenshchikov, 2014. "Transport catastrophe analysis as an alternative to a fractal description: theory and application to financial crisis time series," Papers 1405.6990, arXiv.org, revised Sep 2014.
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