Lack of Critical Slowing Down Suggests that Financial Meltdowns Are Not Critical Transitions, yet Rising Variability Could Signal Systemic Risk

Time-series-analysis-based detection of critical transitions in real-world non-autonomous systems

Real-world non-autonomous systems are open, out-of-equilibrium systems that evolve in and are driven by temporally varying environments. Such systems can show multiple timescale and transient dynamics together with transitions to very different and, at times, even disastrous dynamical regimes. Since such critical transitions disrupt the systems' intended or desired functionality, it is crucial to understand the underlying mechanisms, to identify precursors of such transitions, and to reliably detect them in time series of suitable system observables to enable forecasts. This review critically assesses the various steps of investigation involved in time-series-analysis-based detection of critical transitions in real-world non-autonomous systems: from the data recording to evaluating the reliability of offline and online detections. It will highlight pros and cons to stimulate further developments, which would be necessary to advance understanding and forecasting nonlinear behavior such as critical transitions in complex systems.

Exploring the role of the potential surface in the behaviour of early warning signals

The theory of critical slowing down states that a system displays increasing relaxation times as it approaches a critical transition. These changes can be seen in statistics generated from timeseries data, which can be used as early warning signals of a transition. Such early warning signals would be of value for emerging infectious diseases or to understand when an endemic disease is close to elimination. However, in applications to a variety of epidemiological models there is frequent disagreement with the general theory of critical slowing down, with some indicators performing well on prevalence data but not when applied to incidence data. Furthermore, the alternative theory of critical speeding up predicts contradictory behaviour of early warning signals prior to some stochastic transitions. To investigate the possibility of observing critical speeding up in epidemiological models we characterise the behaviour of common early warning signals in terms of a system's potential surface and noise around a quasi-steady state. We then describe a method to obtain these key features from timeseries data, taking as a case study a version of the SIS model, adapted to demonstrate either critical slowing down or critical speeding up. We show this method accurately reproduces the analytic potential surface and diffusion function, and that these results can be used to determine the behaviour of early warning signals and correctly identify signs of both critical slowing down and critical speeding up.

Early Warning Signals in Phase Space: Geometric Resilience Loss Indicators From Multiplex Cumulative Recurrence Networks

The detection of Early Warning Signals (EWS) of imminent phase transitions, such as sudden changes in symptom severity could be an important innovation in the treatment or prevention of disease or psychopathology. Recurrence-based analyses are known for their ability to detect differences in behavioral modes and order transitions in extremely noisy data. As a proof of principle, the present paper provides an example of a recurrence network based analysis strategy which can be implemented in a clinical setting in which data from an individual is continuously monitored for the purpose of making decisions about diagnosis and intervention. Specifically, it is demonstrated that measures based on the geometry of the phase space can serve as Early Warning Signals of imminent phase transitions. A publicly available multivariate time series is analyzed using so-called cumulative Recurrence Networks (cRN), which are recurrence networks with edges weighted by recurrence time and directed towards previously observed data points. The results are compared to previous analyses of the same data set, benefits, limitations and future directions of the analysis approach are discussed.

Using persistent homology as preprocessing of early warning signals for critical transition in flood

Flood early warning systems (FLEWSs) contribute remarkably to reducing economic and life losses during a flood. The theory of critical slowing down (CSD) has been successfully used as a generic indicator of early warning signals in various fields. A new tool called persistent homology (PH) was recently introduced for data analysis. PH employs a qualitative approach to assess a data set and provide new information on the topological features of the data set. In the present paper, we propose the use of PH as a preprocessing step to achieve a FLEWS through CSD. We test our proposal on water level data of the Kelantan River, which tends to flood nearly every year. The results suggest that the new information obtained by PH exhibits CSD and, therefore, can be used as a signal for a FLEWS. Further analysis of the signal, we manage to establish an early warning signal for ten of the twelve flood events recorded in the river; the two other events are detected on the first day of the flood. Finally, we compare our results with those of a FLEWS constructed directly from water level data and find that FLEWS via PH creates fewer false alarms than the conventional technique.

Testing Critical Slowing Down as a Bifurcation Indicator in a Low-Dissipation Dynamical System

We study a two-dimensional low-dissipation nonautonomous dynamical system, with a control parameter that is swept linearly in time across a transcritical bifurcation. We investigate the relaxation time of a perturbation applied to a variable of the system and we show that critical slowing down may occur at a parameter value well above the bifurcation point. We test experimentally the occurrence of critical slowing down by applying a perturbation to the accessible control parameter and we find that this perturbation leaves the system behavior unaltered, thus providing no useful information on the occurrence of critical slowing down. The theoretical analysis reveals the reasons why these tests fail in predicting an incoming bifurcation.

Prospects for detecting early warning signals in discrete event sequence data: Application to epidemiological incidence data

Early warning signals (EWS) identify systems approaching a critical transition, where the system undergoes a sudden change in state. For example, monitoring changes in variance or autocorrelation offers a computationally inexpensive method which can be used in real-time to assess when an infectious disease transitions to elimination. EWS have a promising potential to not only be used to monitor infectious diseases, but also to inform control policies to aid disease elimination. Previously, potential EWS have been identified for prevalence data, however the prevalence of a disease is often not known directly. In this work we identify EWS for incidence data, the standard data type collected by the Centers for Disease Control and Prevention (CDC) or World Health Organization (WHO). We show, through several examples, that EWS calculated on simulated incidence time series data exhibit vastly different behaviours to those previously studied on prevalence data. In particular, the variance displays a decreasing trend on the approach to disease elimination, contrary to that expected from critical slowing down theory; this could lead to unreliable indicators of elimination when calculated on real-world data. We derive analytical predictions which can be generalised for many epidemiological systems, and we support our theory with simulated studies of disease incidence. Additionally, we explore EWS calculated on the rate of incidence over time, a property which can be extracted directly from incidence data. We find that although incidence might not exhibit typical critical slowing down properties before a critical transition, the rate of incidence does, presenting a promising new data type for the application of statistical indicators.

An Early Warning System for Flood Detection Using Critical Slowing Down

The theory of critical slowing down (CSD) suggests an increasing pattern in the time series of CSD indicators near catastrophic events. This theory has been successfully used as a generic indicator of early warning signals in various fields, including climate research. In this paper, we present an application of CSD on water level data with the aim of producing an early warning signal for floods. To achieve this, we inspect the trend of CSD indicators using quantile estimation instead of using the standard method of Kendall's tau rank correlation, which we found is inconsistent for our data set. For our flood early warning system (FLEWS), quantile estimation is used to provide thresholds to extract the dates associated with significant increases on the time series of the CSD indicators. We apply CSD theory on water level data of Kelantan River and found that it is a reliable technique to produce a FLEWS as it demonstrates an increasing pattern near the flood events. We then apply quantile estimation on the time series of CSD indicators and we manage to establish an early warning signal for ten of the twelve flood events. The other two events are detected on the first day of the flood.

Critical slowing down associated with critical transition and risk of collapse in crypto-currency

The year 2017 saw the rise and fall of the crypto-currency market, followed by high variability in the price of all crypto-currencies. In this work, we study the abrupt transition in crypto-currency residuals, which is associated with the critical transition (the phenomenon of critical slowing down) or the stochastic transition phenomena. We find that, regardless of the specific crypto-currency or rolling window size, the autocorrelation always fluctuates around a high value, while the standard deviation increases monotonically. Therefore, while the autocorrelation does not display the signals of critical slowing down, the standard deviation can be used to anticipate critical or stochastic transitions. In particular, we have detected two sudden jumps in the standard deviation, in the second quarter of 2017 and at the beginning of 2018, which could have served as the early warning signals of two major price collapses that have happened in the following periods. We finally propose a mean-field phenomenological model for the price of crypto-currency to show how the use of the standard deviation of the residuals is a better leading indicator of the collapse in price than the time-series' autocorrelation. Our findings represent a first step towards a better diagnostic of the risk of critical transition in the price and/or volume of crypto-currencies.

Inferring critical thresholds of ecosystem transitions from spatial data

Ecosystems can undergo abrupt transitions between alternative stable states when the driver crosses a critical threshold. Dynamical systems theory shows that when ecosystems approach the point of loss of stability associated with these transitions, they take a long time to recover from perturbations, a phenomenon known as critical slowing down. This generic feature of dynamical systems can offer early warning signals of abrupt transitions. However, these signals are qualitative and cannot quantify the thresholds of drivers at which transition may occur. Here, we propose a method to estimate critical thresholds from spatial data. We show that two spatial metrics, spatial variance and autocorrelation of ecosystem state variable, computed along driver gradients can be used to estimate critical thresholds. First, we investigate cellular-automaton models of ecosystem dynamics that show a transition from a high-density state to a bare state. Our models show that critical thresholds can be estimated as the ecosystem state and the driver values at which spatial variance and spatial autocorrelation of the ecosystem state are maximum. Next, to demonstrate the application of the method, we choose remotely sensed vegetation data (Enhanced Vegetation Index, EVI) from regions in central Africa and northeast Australia that exhibit alternative states in woody cover. We draw transects (8 × 90 km) that span alternative stable states along rainfall gradients. Our analyses of spatial variance and autocorrelation of EVI along transects yield estimates of critical thresholds. These estimates match reasonably well with those obtained by an independent method that uses large-scale (250 × 200 km) spatial data sets. Given the generality of the principles that underlie our method, our method can be applied to a variety of ecosystems that exhibit alternative stable states.

Early warning signals for critical transitions in cardiopulmonary health, related to air pollution in an urban Chinese population

Respiratory, and cardio-cerebrovascular health-related diseases significantly threaten human health and together with air pollution form a complex pathophysiological system. Other complex biological systems show that increased variance and autocorrelations in time series may act as valid early warning signals for critical transitions. On population level, we determined the likelihood that increased variance and autocorrelation of hospital visit on cardiopulmonary disease preceded critical transitions in population health by human-pollution interactions. We investigated long-term hospital visits from a hospital in Nanjing City, China during 2006-2016 for the most important cardiopulmonary diseases likely to be influenced by air pollution: cerebrovascular accident disease (CVAD), coronary artery disease (CAD), chronic obstructive pulmonary disease (COPD), lung cancer disease (LCD), and the grouped categories of respiratory system disease (RESD) and cardio-cerebrovascular system disease (CCD). The time series of standard deviations (SDs) and autocorrelation at-lag-1 (AR-1) were studied as potential Early-Warning Indicators (EWIs) of transitions in population health. Elevated SDs provided an early warning for critical transitions in visit for LCD and overall CCD and CVAD, for the period of 2012-2013, after which a real transition of increased visit occurred for these disease categories. Statistical testing showed that these SDs were significantly increased (p < 0.1). The long-term air pollution together with intermittent pollution episodes may have triggered critical transitions in population health for cardiopulmonary disease. It is recommended to consider significant increases in variability in time series of relevant system parameters, such as visit, as early warning signs for future transitions in populations' health states.

How one might miss early warning signals of critical transitions in time series data: A systematic study of two major currency pairs

There is growing interest in the use of critical slowing down and critical fluctuations as early warning signals for critical transitions in different complex systems. However, while some studies found them effective, others found the opposite. In this paper, we investigated why this might be so, by testing three commonly used indicators: lag-1 autocorrelation, variance, and low-frequency power spectrum at anticipating critical transitions in the very-high-frequency time series data of the Australian Dollar-Japanese Yen and Swiss Franc-Japanese Yen exchange rates. Besides testing rising trends in these indicators at a strict level of confidence using the Kendall-tau test, we also required statistically significant early warning signals to be concurrent in the three indicators, which must rise to appreciable values. We then found for our data set the optimum parameters for discovering critical transitions, and showed that the set of critical transitions found is generally insensitive to variations in the parameters. Suspecting that negative results in the literature are the results of low data frequencies, we created time series with time intervals over three orders of magnitude from the raw data, and tested them for early warning signals. Early warning signals can be reliably found only if the time interval of the data is shorter than the time scale of critical transitions in our complex system of interest. Finally, we compared the set of time windows with statistically significant early warning signals with the set of time windows followed by large movements, to conclude that the early warning signals indeed provide reliable information on impending critical transitions. This reliability becomes more compelling statistically the more events we test.

Multifractality and Network Analysis of Phase Transition

Many models and real complex systems possess critical thresholds at which the systems shift dramatically from one sate to another. The discovery of early-warnings in the vicinity of critical points are of great importance to estimate how far the systems are away from the critical states. Multifractal Detrended Fluctuation analysis (MF-DFA) and visibility graph method have been employed to investigate the multifractal and geometrical properties of the magnetization time series of the two-dimensional Ising model. Multifractality of the time series near the critical point has been uncovered from the generalized Hurst exponents and singularity spectrum. Both long-term correlation and broad probability density function are identified to be the sources of multifractality. Heterogeneous nature of the networks constructed from magnetization time series have validated the fractal properties. Evolution of the topological quantities of the visibility graph, along with the variation of multifractality, serve as new early-warnings of phase transition. Those methods and results may provide new insights about the analysis of phase transition problems and can be used as early-warnings for a variety of complex systems.

Early Warning Signals of Financial Crises with Multi-Scale Quantile Regressions of Log-Periodic Power Law Singularities

We augment the existing literature using the Log-Periodic Power Law Singular (LPPLS) structures in the log-price dynamics to diagnose financial bubbles by providing three main innovations. First, we introduce the quantile regression to the LPPLS detection problem. This allows us to disentangle (at least partially) the genuine LPPLS signal and the a priori unknown complicated residuals. Second, we propose to combine the many quantile regressions with a multi-scale analysis, which aggregates and consolidates the obtained ensembles of scenarios. Third, we define and implement the so-called DS LPPLS Confidence^™ and Trust^™ indicators that enrich considerably the diagnostic of bubbles. Using a detailed study of the “S&P 500 1987” bubble and presenting analyses of 16 historical bubbles, we show that the quantile regression of LPPLS signals contributes useful early warning signals. The comparison between the constructed signals and the price development in these 16 historical bubbles demonstrates their significant predictive ability around the real critical time when the burst/rally occurs.