Lack of Critical Slowing Down Suggests that Financial Meltdowns Are Not Critical Transitions, yet Rising Variability Could Signal Systemic Risk

Complex systems inspired analysis suggests a hypothesis that financial meltdowns are abrupt critical transitions that occur when the system reaches a tipping point. Theoretical and empirical studies on climatic and ecological dynamical systems have shown that approach to tipping points is preceded by a generic phenomenon called critical slowing down, i.e. an increasingly slow response of the system to perturbations. Therefore, it has been suggested that critical slowing down may be used as an early warning signal of imminent critical transitions. Whether financial markets exhibit critical slowing down prior to meltdowns remains unclear. Here, our analysis reveals that three major US (Dow Jones Index, S&P 500 and NASDAQ) and two European markets (DAX and FTSE) did not exhibit critical slowing down prior to major financial crashes over the last century. However, all markets showed strong trends of rising variability, quantified by time series variance and spectral function at low frequencies, prior to crashes. These results suggest that financial crashes are not critical transitions that occur in the vicinity of a tipping point. Using a simple model, we argue that financial crashes are likely to be stochastic transitions which can occur even when the system is far away from the tipping point. Specifically, we show that a gradually increasing strength of stochastic perturbations may have caused to abrupt transitions in the financial markets. Broadly, our results highlight the importance of stochastically driven abrupt transitions in real world scenarios. Our study offers rising variability as a precursor of financial meltdowns albeit with a limitation that they may signal false alarms.

Hydrogen Bonds Computing Server (HBCS): an online web server to compute hydrogen-bond interactions and their precision

Hydrogen bonds in biological macromolecules play significant structural and functional roles. They are the key contributors to most of the interactions without which no living system exists. In view of this, a web-based computing server, the Hydrogen Bonds Computing Server (HBCS), has been developed to compute hydrogen-bond interactions and their standard deviations for any given macromolecular structure. The computing server is connected to a locally maintained Protein Data Bank (PDB) archive. Thus, the user can calculate the above parameters for any deposited structure, and options have also been provided for the user to upload a structure in PDB format from the client machine. In addition, the server has been interfaced with the molecular viewers Jmol and JSmol to visualize the hydrogen-bond interactions. The proposed server is freely available and accessible via the World Wide Web at http://bioserver1.physics.iisc.ernet.in/hbcs/.