A Novel Causal Risk-Based Decision-Making Methodology: The Case of Coronavirus.

Either in the form of nature's wrath or a pandemic, catastrophes cause major destructions in societies, thus requiring policy and decisionmakers to take urgent action by evaluating a host of interdependent parameters, and possible scenarios. The primary purpose of this article is to propose a novel risk-based, decision-making methodology capable of unveiling causal relationships between pairs of variables. Motivated by the ongoing global emergency of the coronavirus pandemic, the article elaborates on this powerful quantitative framework drawing on data from the United States at the county level aiming at assisting policy and decision makers in taking timely action amid this emergency. This methodology offers a basis for identifying potential scenarios and consequences of the ongoing 2020 pandemic by drawing on weather variables to examine the causal impact of changing weather on the trend of daily coronavirus cases.

Unveiling causal interactions in complex systems.

Throughout time, operational laws and concepts from complex systems have been employed to quantitatively model important aspects and interactions in nature and society. Nevertheless, it remains enigmatic and challenging, yet inspiring, to predict the actual interdependencies that comprise the structure of such systems, particularly when the causal interactions observed in real-world phenomena might be persistently hidden. In this article, we propose a robust methodology for detecting the latent and elusive structure of dynamic complex systems. Our treatment utilizes short-term predictions from information embedded in reconstructed state space. In this regard, using a broad class of real-world applications from ecology, neurology, and finance, we explore and are able to demonstrate our method's power and accuracy to reconstruct the fundamental structure of these complex systems, and simultaneously highlight their most fundamental operations.

Hidden interactions in financial markets.

The hidden nature of causality is a puzzling, yet critical notion for effective decision-making. Financial markets are characterized by fluctuating interdependencies which seldom give rise to emergent phenomena such as bubbles or crashes. In this paper, we propose a method based on symbolic dynamics, which probes beneath the surface of abstract causality and unveils the nature of causal interactions. Our method allows distinction between positive and negative interdependencies as well as a hybrid form that we refer to as "dark causality." We propose an algorithm which is validated by models of a priori defined causal interaction. Then, we test our method on asset pairs and on a network of sovereign credit default swaps (CDS). Our findings suggest that dark causality dominates the sovereign CDS network, indicating interdependencies which require caution from an investor's perspective.