Sophocles project presentation

A Sophocles project presentation has been created, giving an overview of what the project is about.

Second All Hands Meeting 16-18 December 2013

The second All Hands Meeting (AHM) of the Sophocles project takes place from 16th-18th December 2013 in Warsaw, and will be hosted by the Warsaw University of Technology (WUT). The meeting will last for 3 days and the whole consortium will come together to discuss the work of the Work Packages, including updates about theory of information processing; theory of criticality, emergence, tipping points and self-organisation; computational exploratory; and socio-economic datasets. UIB and JSI will present a hands on session about the computational exploratory, which will be recorded and published on the Sophocles website in due course.

3rd European Summer School on Mathematical Modelling of Complex Systems

Rick Quax and Omri Har-Shemesh attended the “3rd European Summer School for Mathematical Modeling of Complex Systems“, which was held in Heraklion, Crete between the 15th and 27th of July 2013.  The lectures in the summer school covered the foundations of complexity science, complex networks (theory andapplication), complex quantum systems and complexity in the social and biological sciences. The school also included a practical computer lab where they could explore non-linear systems first-hand.

In addition to the science covered, the program also included a talk by a PRL editor about publishing in PRL and the new PRX journal, and different aspects of Cretan culture. A visit to the Faistos palace with Prof. Gareth Owens which explained about the Minoan civilisation and the Faistos Disc, a pottery festival in the village of Thrapsano and even some Cretan dancing lessons.

First All Hands Meeting Palma de Mallorca

The Sophocles consortium met at the Institute of Applied Computing & Community Code of the Universitat de les Illes Balears in Palma de Mallorca from 10^th to 12^th June for its first All Hands Meeting.  Around twenty representatives from the partners in the project attended the meeting. The consortium was pleased to be joined by the two members of its External Advisory Board: Dr Emanuela Merelli of the TOPDRIM project, and Dr Primoz Skraba of the TOPOSYS project. The main objective of the meeting was to take stock of the current results in the Work Packages, to look at where and how they fit in the Sophocles work plan, and to make a planning for the next months.

On the first day the whole consortium attended a plenary session, with presentations by all the Work Packages on the progress of their work and objectives for the next six months. On the next two days the meeting continued with separate Work Package meetings to discuss the progress of the research. On the second day, break-out sessions were self-organized in order to brainstorm about possible collaboration projects between various partners. This resulted in a list of over half a  dozen concrete project descriptions that the partners will pursue in the coming time. The Project Management Committee also met to discuss the managerial aspects of the project, including the planning of meetings and activities for the next year. During the morning of the third day, small groups sat together and ironed out the last details.

In the plenary session, the members of the External Advisory Board gave an introductory presentation to the consortium about their projects, and pointed out potential areas for collaborations and promising lines for research between their projects and Sophocles, for example around topological information and topological hypothesis on the origin of phase transitions. These collaborations will continue at the Satellite Meeting on Information Processing in Complex Networks at ECCS 2013.

The next Sophocles All Hands Meeting will take place from 16^th-18^th December at Warsaw University of Technology in Warsaw, Poland.

Vacancy at UIB

The Institute of Applied Computing & Community Code at UIB is looking for a computational physicist for a 2-year postodc position related to the Sophocles Project, to begin no later than December 2013. The appointee will also actively participate in the development of the simulation platform Simflowny. To request more information or to apply please send an email to info@iac3.eu.

Information transmission a good predictor of credit crisis

The recent credit crisis was preceded by a sharp increase in the transmission of information in the largest derivatives market. Such transmissions can therefore serve as indicators for the instability of the market. A team of researchers from the University of Amsterdam (UvA) and the Dutch ING Bank have discovered this unexpected link and have published their findings in the leading online journal Scientific Reports, from the publishers of Nature.

The financial swap market is a large network of risk swaps between banks and pension funds, whereby each swap ‘exchanges’ risk between two players. Each player seeks to minimise the risk in his own portfolio by engaging in interest rate swaps with other players. Over time, however, this practice can lead to the entire market becoming an unstable network, in which one small shock can trigger a critical situation. Because no single party has a complete overview of this network, the build-up of instability goes undetected. The recent credit crisis came as a surprise, but the findings from the UvA and ING study may be used to generate a useful early warning signal for possible new crises in the future.

Growing dependence

UvA researcher Dr Rick Quax and his colleagues Prof. Peter Sloot (UvA) and Dr Drona Kandhai (UvA and ING) explain their discovery: ‘In mathematical terms, a build-up of instability in a network leads to an increase in information transmissions. But because the financial swap network is hidden, we can’t immediately compute these transmissions. As it turns out, we found a solution in the structure of the swap itself. Basically, a growing interdependence between banks causes a growing interdependence between swap interest rates with varying maturities. Consequently, information transmissions in the financial network also cause information transmissions between interest rate levels. As this data is publicly available, we were able to measure the build-up of instability after all.’

Early warning system

The researchers applied their analysis to the interest rate levels of the Euro and Dollar markets over the past 12 years. The resulting data provided the first clear picture of how years of accumulated instability on the dollar market suddenly overflowed into the euro market roughly three months before the credit crisis struck. In both markets, the onset of the current crisis (the bankruptcy of Lehman Brothers in September 2008) was preceded by a sharp increase in this instability. Quax, Kandhai and Sloot have demonstrated that this increase could have been used to provide an automatic early warning three to six months before the actual collapse.

The introduction of such an early warning signal could actually bolster the robustness of the financial market. Since an increase in information transmission would indicate a heightened possibility of a crisis, banks and pension funds would be able to adjust their behaviour accordingly, for example by trading risks in a different format until the warning signal dies out.

Given that networks are a common phenomenon in nature – from molecular protein networks all the way up to social networks – the results of this study could also help to provide a better understanding of robustness and the cause of sudden changes in a wide range of complex systems, both natural and man-made.

Publication details

Rick Quax, Drona Kandhai and Peter M.A. Sloot: ‘Information dissipation as an early-warning signal for the Lehman Brothers collapse in financial time series’, in: Scientific Reports, 30 May 2013.

Read the article.

IPCS’13 Satellite Meeting

We co-organize the satellite meeting Information Processing in Complex Networks as part of ECCS together with TOPDRIM on September 18, 2013. The subject is on using the inherent storage and transfer of bits of information to understand the behavior of complex networks. The deadline for submitting an abstract is June 15!

New theory promising for predicting behaviour of complex networks

First results of PhD research by Rick Quax suggest that a combination of information theory, network theory, and statistical mechanics can lead to a promising theory to predict the behaviour of complex networks. Quax will defend his PhD thesis “Information processing in complex networks” on Thursday 14th March in Amsterdam. His promotor is Prof. Dr. P.M.A. Sloot. See also here. Quax’ research was developed as part of the EC funded Dynanets project (www.dynanets.org) He will carry on his research under the umbrella of the Sophocles project. For more info please contact Rick Quax at r.quax@uva.nl .

Satellite meeting at ECCS 2013

The Sophocles and TOPDRIM projects are jointly organising a full-day satellite meeting at ECCS 2013 about information processing in complex systems on Wednesday 18th September at the World Trade Centre in Barcelona. To attend the session it is mandatory to register to the European Conference on Complex Systems 2013. For more info please click here