Econophysicist Claims Rogue Waves Could Account for Volatility in Financial Markets
The current financial crisis is often described in terms evocative of Poseidon's wrath: a wave of foreclosures, a perfect storm of market conditions, a tsunami of debt. It turns out those descriptions may be more accurate, and more useful, than other metaphors. If financial markets behave less like the stochastic, Brownian systems they are often compared to and more like nonlinear wave systems, then rogue waves can account for spikes and plunges in financial markets. In fact, if markets do mimic nonlinear wave-like systems, then rogue waves periodically upending free markets are inevitable. Rogue waves are large swells that occur spontaneously far out to sea, threatening even large ocean liners. While rogue waves had been observed anecdotally and even predicted mathematically for years beforehand, they weren't recorded and proved until 1995. Since then, they've been discovered in several other systems like fiber optics and microwaves. Now, Chinese researchers are positing that rogue...