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Adding random number generators to Minsky

2013-09-27
2015-07-28
  • Chris Gadarowski

    While Minsky is useful to illustrate how economic systems can be non-linear, it is my impression that it should have random number blocks to allow for exogenous events to affect the economy. And they can be simple random number functions, such as Gauss, poisson, etc. For example, Sornette and Anderson (2002) replicate the various non-guassian distributional characteristics of actual stock market series using only one random Gaussian variable in a model of the stock market bubbles and crashes:

    "A Nonlinear Super-Exponential Rational Model of Speculative Financial Bubbles"
    D. Sornette (Univ. Nice/CNRS and UCLA), J.V. Andersen (Univ. Nice/CNRS)
    (Submitted on 18 Apr 2001 (v1), last revised 19 Apr 2002 (this version, v2))
    http://arxiv.org/abs/condmat/0104341

    Sornette has gone on to develop a stock market prediction model based in part on this work that has gained notice of professional money managers:

    http://www.ted.com/talks/didier_sornette_how_we_can_predict_the_next_financial_crisis.html

    In my opinion, Didier and Anderson's model of speculative financial bubbles "cheats" by assuming a jump process of regime change without explaining the economic basis for the different regimes. My guess is that non-linear models of the economy could explain these different regimes, but to replicate the distribution of actual macroeconomic variables in a manner as rich as Didier and Anderson's requires including simple random variables in the model.

     
    • High Performance Coder

      I agree. I created a ticket #366 to cover this. There are some
      technical issues though, as I note in the ticket description:

      We did have a uniform rng in an earlier version of Minsky, but I
      removed it when we moved to using Runge Kutta solvers, as I wasn't
      sure how to code a derivative of a random function.

      Technically, it is simple to add in an arbitrary nonuniform RNG, with
      the distribution describable via a text string. The difficulty is to
      ensure that it works correctly ith the solver. The derivative question
      is only relevant for implicit methods, so we may need to disable the
      selection of implicit methods when a random component is included. But
      I also need to sure that the ODE solver works correctly - stochastic
      differential calculus is subtly different from regular differential
      calculus, in a way that I'm aware of, but by no means expert
      on. Unfortunately, the guy in my department who knows most about this
      stuff retired a few years ago :(.

      Cheers

      On Fri, Sep 27, 2013 at 05:25:13PM +0000, Chris Gadarowski wrote:

      While Minsky is useful to illustrate how economic systems can be non-linear, it is my impression that it should have random number blocks to allow for exogenous events to affect the economy. And they can be simple random number functions, such as Gauss, poisson, etc. For example, Sornette and Anderson (2002) replicate the various non-guassian distributional characteristics of actual stock market series using only one random Gaussian variable in a model of the stock market bubbles and crashes:

      "A Nonlinear Super-Exponential Rational Model of Speculative Financial Bubbles"
      D. Sornette (Univ. Nice/CNRS and UCLA), J.V. Andersen (Univ. Nice/CNRS)
      (Submitted on 18 Apr 2001 (v1), last revised 19 Apr 2002 (this version, v2))
      http://arxiv.org/abs/condmat/0104341

      Sornette has gone on to develop a stock market prediction model based in part on this work that has gained notice of professional money managers:

      http://www.ted.com/talks/didier_sornette_how_we_can_predict_the_next_financial_crisis.html

      In my opinion, Didier and Anderson's model of speculative financial bubbles "cheats" by assuming a jump process of regime change without explaining the economic basis for the different regimes. My guess is that non-linear models of the economy could explain these different regimes, but to replicate the distribution of actual macroeconomic variables in a manner as rich as Didier and Anderson's requires including simple random variables in the model.


      Adding random number generators to Minsky


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      --


      Prof Russell Standish Phone 0425 253119 (mobile)
      Principal, High Performance Coders
      Visiting Professor of Mathematics hpcoder@hpcoders.com.au
      University of New South Wales http://www.hpcoders.com.au


       
  • jdiligence

    jdiligence - 2013-12-31

    I would like a RNG too for similar reasons.

    It seems to me that a RNG in minsky doesn't need to be an irreversible function like with typical RNGs for crypto which must be irreversible to be secure.

    Something like a white noise function would do for simulation purposes.

     
    • High Performance Coder

      On Tue, Dec 31, 2013 at 03:24:31PM +0000, jdiligence wrote:

      I would like a RNG too for similar reasons.

      It seems to me that a RNG in minsky doesn't need to be an irreversible function like with typical RNGs for crypto which must be irreversible to be secure.

      Something like a white noise function would do for simulation purposes.

      The plan is to expose the underlying pseudo random number library of
      EcoLab, which provides a range of generators, and and arbitrary
      distributions.

      The issue is that some thought needs to be given to what a random
      variable means in a differential equation context. To handle this
      correctly requires some understanding of stochastic calculus, for
      which I need to hit the books to study. Hopefully, that will happen
      this year.

      Real random sources can be provided on the Linux platform by accessing
      the built in entropy harvester of the kernel (/dev/random), or by
      linking to the HAVEGE library on other platforms. But is there much
      call for that?

      Cheers

      --


      Prof Russell Standish Phone 0425 253119 (mobile)
      Principal, High Performance Coders
      Visiting Professor of Mathematics hpcoder@hpcoders.com.au
      University of New South Wales http://www.hpcoders.com.au


       
  • Bernard Hurley

    Bernard Hurley - 2015-07-27

    A real random source might be useful if you wished to convince someone that you had not somehow fudged your data.

     
    • High Performance Coder

      The reason why there is no random number tool in Minsky (there was one
      initially), is that solving a stochastic system via Runge-Kutta is undefined.

      What may work is a random populate option to the data tool - ie the
      random nature is computed up front prior to starting the simulation.

      --


      Prof Russell Standish Phone 0425 253119 (mobile)
      Principal, High Performance Coders
      Visiting Professor of Mathematics hpcoder@hpcoders.com.au
      University of New South Wales http://www.hpcoders.com.au


       
  • Bernard Hurley

    Bernard Hurley - 2015-07-28

    A random populate option to the data tool would be quite useful.

     

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