Financial markets are more prone to sharp swings than traditional theory suggests
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Updates every hour. Last Updated: 6-Nov-2025 07:12 ET (6-Nov-2025 12:12 GMT/UTC)
For decades, financial risk has been measured with Gaussian-based models built on the assumption that markets follow a bell-shaped curve. These models underpin decisions from investment strategies to regulation, yet they fail to capture the true scale of market disruptions. A new doctoral dissertation from the University of Vaasa, Finland, argues that power laws offer a more accurate lens through which to understand financial markets’ risk dynamics.