Major Shocks To Complex Systems – Reverberations Before Cascading Failures Considered

Not long ago, I was talking to an investor friend of mine who also happens to be a mathematician. We were discussing complex systems, and ETF derivative algorithm tracking schemes. We got to talking about what the stock markets look like when they are topsy and how there could be a major hit, then extreme volatile activity, and then just when you think everything is stabilizing, it falls apart. We also see this in biological systems like the human body after someone has a heart attack, breaks a hip, or has a serious bout with a virus or bacterial infection.

Indeed, we could say the same for most complex systems whether it be a car, aircraft, or a piece of machinery. Occasionally something takes a strong hit, and it is damaged inside, although it runs a little rough, everything appears to be okay, but it’s not. It’s going through reverberations, and on the verge of a cascading failure event. It seems as if we can predict equipment failure, biological failures, and even major stock market pullbacks or collapses based on the rates of change, through mathematics.

There is an interesting book on this topic, it’s available as an eBook, indeed, if this topic interests you, then I think you should read it. Continue reading »

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