18 January 2018 at 10:02 GMT
• Amazon, Bitcoin charts show exponential versus super-exponential growth
• 'In the presence of a bubble, the risk of a crash is significantly increased'
• Bubbles cause traders, investors to detach expectations from fundamentals
By Anders Nysteen
Bubbles are often identified by the behaviours that surround them, such as the over-extension of hopes and the eventual sharp crash. According to Saxo Bank quantitative analyst Anders Nysteen, however, such readings downplay the very real mathematical structures that underpin asset price bubbles.
More than a simple metaphor, a bubble is a distinct mathematical form in which super-exponential growth causes a departure from fundamentals, and an eventual sharp correction. Of all concepts to keep front-of-mind into 2018, this may be one of the most crucial.
Saxo Bank's strategy team is out with their take on world markets for the first quarter of 2018. Download your copy now.