On May 26th 2017, Professor Didier Sornette of the Federal Institute of Technology, Zurich, Switzerland, gave a lecture at SUSTech on “Dragon-Kings: the nature of extreme crises and statistical tools, generating mechanisms, prediction and control” in the library lecture hall. The event was chaired by Li Jingzhi, deputy director of the Department of Mathematics.
On the site of the lecture
Professor Didier Sornette is a top international financial scientist and geophysicist. He became a doctor of physics at the University of Nice in 1985 and worked in many prestigious institutions. He is now a professor at the Swiss Federal Institute of Technology in Zurich, which consistently ranks in the top 10 universities of the world. His research includes crises and extreme events in complex systems; bubbles and collapse in finance and economics, portfolio optimization, market microstructure; pattern formation of complex systems and space-time structures, dynamic system theory, time series analysis with forecasting tools.
Didier Sornette’s lecture
Sornette first showed a series of catastrophic pictures: a volcanic eruption, earthquakes, stock crashes … he then explained to the audience his proposed theory of the “Dragon King” for each one. A “Dragon King” refers to the specific mechanism triggered by special extreme events. Unlike the traditional Black Swan event, which can not be predicted in advance, the “Dragon King” event is likely to be predicted; the “Black Swan” event is caused by heterogeneity of the system, the “Dragon King” event is initiated from the system synergy.
He went on to explain the mathematical basis of the theory of the Dragon King with vivid examples and detailed formulas. He cited examples of the 2003-2008 financial bubble. At that time, people were concerned only with stable GDP growth, well-controlled low inflation, low unemployment and low financial volatility, but did not focus on the existence of conventional circumstances. He says “if you just look at the statistics, it is divided into fragments, and then you are just doing maths problem”.
Predicting and controlling the “Dragon King” incidents’ theory was first successfully used in the diagnosis of the Ariana rocket’s key components rupture. In the financial sector, in 2008 he predicted the upcoming stock market crash in China, and industry experts at the time had expressed doubts, saying it was almost impossible to occur at this time. Three weeks after he announced the forecast, China’s stock market crashed. Didier Sornette points out that there are several features before the advent of the Dragon King: a super-exponential growth with positive feedback; growing variance; slower recovery from volatility, just to name a few. Professor Didier Sornette studied a dynamic system with “Dragon King” events in which the cycle could see the event removed, if the adjustments can be handled in time.
Q & A session
After the lecture, Professor Didier Sornette answered the questions raised by professors and students in the audience. When a student asked him about his take on non-math students handling the subject, he said, “I always tell my students that you should not be afraid of maths, it’s just a language… the best language.”
Text: Student News Agency Wei Xin
Photo: Dong Zeyu, Li Chengkun
Edited by: Jeremy Welburn
Edited by: Jeremy Welburn
