• • • • • • • • • Predicting liquidity crises 

                • The calm voice in the storm: it started with liquidity. 

Before contagion, before panic, before the headlines: there was a tightening in funding markets, a silent withdrawal from risk. Those who noticed the shift in flows were already preparing for impact. 

1. In highly complex and data-rich modern markets, extreme price events are occurring more frequently and rapidly. There are increasing concerns on how fragile liquidity is in modern markets as it can evaporate abruptly, during these unprecedented uncertain times about the economy, geopolitical tensions and climate change. In the blog High-frequency metrics, we further illustrate how our order book metric, namely Quote Volatility, is able to capture intraday dynamics in the period leading to liquidity crises related to UK Gilt crises and the August 2024 Japanese price crash. 

2. As opposed to classical walks, Quantum walk model has several advantages: (1) using only two control parameters, it is possible to accurately simulate the transitions from normal to extreme market conditions; (2) combined with machine learning, it handles inherently uncertainties which is crucial in predicting liquidity crises when outcomes are not deterministic; (3) it can provide more information about the underlying mechanism of crises. As additional aside, it is also worth noting that quantum walks can offer a quadratic speed-up. In Quantum walk bog, we further illustrate how we use quantum walk model to reproduce extreme price moves using order book information (market depth) around the recent Japanese crash on August 5, 2024.