We study simultaneous price drops of real stocks and show that for high drop thresholds they follow a power-law distribution. To reproduce these collective downturns, we propose a URLanized model of cascade spreading based on a probabilistic response of the system 's elements to stress conditions. This model is solvable using the theory of branching processes and the mean-field approximation  and displays a power-law cascade-size distribution-similar to the empirically observed one-over a wide range of parameters .
We study simultaneous price drops of real stocks and show that for high drop thresholds they follow a power-law distribution. To reproduce these collective downturns, we propose a URLanized model of cascade spreading based on a probabilistic response of the system elements to stress conditions. This model is solvable using the theory of branching processes and the mean-field approximation . For a wide range of parameters, the system is in a critical state and displays a power-law cascade-size distribution similar to the empirically observed one. We further generalize the model to reproduce volatility clustering and other observed properties of real stocks .
D
's
A
. For a wide range of parameters, the system is in a critical state
R
distribution-similar
distribution similar
R
one-over a wide range of parameters
one. We further generalize the model to reproduce volatility clustering and other observed properties of real stocks