Foreign exchange rate entropy evolution during financial crises

Abstract

An entropy balance equation including radiative heating is developed to examine the principle of minimum entropy exchange hypothesized by Paltridge. It is shown that the thermodynamic dissipation (entropy production) due to latent and sensible heat transport cannot be negligible in the entropy balance model. The zonally averaged two-latitude and ten-latitude models with ten radiative heating levels are used to find climates at minima of the entropy exchange rate. The models are examined under two different conditions of the water vapor distribution: one is the case with a given distribution of absolute humidity and the other the case with a given distribution of relative humidity. Multiple minima are found in the former case, while no minima in the latter case. In the former case, one of the minima corresponds to a climate with distributions of temperature and cloud amount similar to those in the present climate. However, it does not correspond to the least minimum of the entropy exchange rate. It is demonstrated that climates at minimum entropy exchange are very sensitive to the parameterization of the humidity distribution.

Diffusive and Arrestedlike Dynamics in Currency Exchange Markets

“…Intrigued by this resemblance, we wonder if the dynamics from currency exchange markets and the one from colloids exhibit a more significant symmetry and if ultimately can be described by equivalent physical laws. Note that colloidal dynamics is driven by parameters such as interparticle interactions, density, or applied shear [35][36][37][38], whereas market dynamics is determined by parameters of a very different nature, such as the trading volume, number of investors at a given period, or balance between supply and demand [39][40][41].…”

Entropy Approach for Volatility of Ethereum and Bitcoin

“…[13] described a generalized cumulative residual entropy based on the non-additive Tsallis entropy. [14] considered the effects of financial crises on foreign exchange (FX) markets, where entropy evolution is measured for different exchange rates, using the time-dependent block entropy method and indicated empirical results suggest that financial crises are associated with significant increase of exchange rate entropy, reflecting instability in FX market dynamics. [15] performed such entropy measure on the time series of prices and volatilities of six financial markets on tick-by-tick data sampled every minute for six years of data from 1999 to 2004 and indicated that the entropy of the volatility series depends on the individual market.…”

Entropy approach for volatility of wind energy

“…Sheraz [21] used entropy approach for volatility markets. Stosic et al [22] considered the effects of financial attacks on alien exchange (FX) markets, where entropy evolution was measured for varied exchange rates, using the time dependent complex entropy method. Ram et al, [23] submitted the applicability of permutation entropy based complication measure of a time series for finding of error in wind turbines, examined a set of electrical data from one faulty and one solid wind turbine using traditional Fast Fourier analysis in addition permutation entropy analysis to compare the complication index of stage flows of the two turbines over time.…”