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| Preface | |
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| Financial Crashes: What, How, Why, And When? | |
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| What Are Crashes, and Why Do We Care? | |
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| The Crash of October 1987 | |
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| Historical Crashes | |
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| The Tulip Mania | |
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| The South Sea Bubble | |
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| The Great Crash of October 1929 | |
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| Extreme Events in Complex Systems | |
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| Is Prediction Possible? A Working Hypothesis | |
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| Fundamentals of Financial Markets | |
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| The Basics | |
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| Price Trajectories | |
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| Return Trajectories | |
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| Return Distributions and Return Correlation | |
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| The Efficient Market Hypothesis and the Random Walk | |
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| The Random Walk | |
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| A Parable: How Information Is Incorporated in Prices, Thus Destroying Potential "Free Lunches" | |
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| Prices Are Unpredictable, or Are They? | |
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| Risk-Return Trade-Off | |
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| Financial Crashes Are "Outliers" | |
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| What Are "Abnormal" Returns? | |
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| Drawdowns (Runs) | |
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| Definition of Drawdowns | |
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| Drawdowns and the Detection of "Outliers" | |
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| Expected Distribution of "Normal" Drawdowns | |
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| Drawdown Distributions of Stock Market Indices | |
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| The Dow Jones Industrial Average | |
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| The Nasdaq Composite Index | |
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| Further Tests | |
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| The Presence of Outliers Is a General Phenomenon | |
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| Main Stock Market Indices, Currencies, and Gold | |
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| Largest U.S. Companies | |
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| Synthesis | |
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| Symmetry-Breaking on Crash and Rally Days | |
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| Implications for Safety Regulations of Stock Markets | |
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| Positive Feedbacks | |
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| Feedbacks and Self-Organization in Economics | |
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| Hedging Derivatives, Insurance Portfolios, and Rational Panics | |
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| "Herd" Behavior and "Crowd" Effect | |
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| Behavioral Economics | |
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| Herding | |
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| Empirical Evidence of Financial Analysts 'Herding' | |
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| Forces of Imitation | |
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| It Is Optimal to Imitate When Lacking Information | |
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| Mimetic Contagion and the Urn Models | |
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| Imitation from Evolutionary Psychology | |
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| Rumors | |
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| The Survival of the Fittest Idea | |
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| Gambling Spirits | |
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| "Anti-Imitation" and Self-Organization | |
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| Why It May Pay to Be in the Minority | |
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| El-Farol's Bar Problem | |
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| Minority Games | |
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| Imitation versus Contrarian Behavior | |
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| Cooperative Behaviors Resulting from Imitation | |
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| The Ising Model of Cooperative Behavior | |
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| Complex Evolutionary Adaptive Systems of Boundedly Rational Agents | |
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| Modeling Financial Bubbles and Market Crashes | |
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| What Is a Model? | |
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| Strategy for Model Construction in Finance | |
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| Basic Principles | |
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| The Principle of Absence of Arbitrage Opportunity | |
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| Existence of Rational Agents | |
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| "Rational Bubbles" and Goldstone Modes of the Price "Parity Symmetry" Breaking | |
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| Price Parity Symmetry | |
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| Speculation as Spontaneous Symmetry Breaking | |
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| Basic Ingredients of the Two Models | |
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| The Risk-Driven Model | |
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| Summary of the Main Properties of the Model | |
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| The Crash Hazard Rate Drives the Market Price | |
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| Imitation and Herding Drive the Crash Hazard Rate | |
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| The Price-Driven Model | |
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| Imitation and Herding Drive the Market Price | |
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| The Price Return Drives the Crash Hazard Rate | |
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| Risk-Driven versus Price-Driven Models | |
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| Hierarchies, Complex Fractal Dimensions, and Log-Periodicity | |
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| Critical Phenomena by Imitation on Hierarchical Networks | |
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| The Underlying Hierarchical Structure of Social Networks | |
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| Critical Behavior in Hierarchical Networks | |
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| A Hierarchical Model of Financial Bubbles | |
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| Origin of Log-Periodicity in Hierarchical Systems | |
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| Discrete Scale Invariance | |
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| Fractal Dimensions | |
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| Organization Scale by Scale: The Renormalization Group | |
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| Principle and Illustration of the Renormalization Group | |
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| The Fractal Weierstrass Function: A Singular Time-Dependent Solution of the Renormalization Group | |
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| Complex Fractal Dimensions and Log-Periodicity | |
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| Importance and Usefulness of Discrete Scale Invariance | |
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| Existence of Relevant Length Scales | |
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| Prediction | |
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| Scenarios Leading | |