Abstract
The ratio of the arrival and processing rates of information at financial markets (CCA/CCL) determines the structure and evolution of a wide variety of topologies of financial interest. This ratio (CCA/CCL) has common and intuitive effects on the distribution of returns, the volatility surface, and the yield curve in the equity and bond markets. As the level and variance of CCA/CCL changes so does the amount of uncertainty in each of the corresponding markets. The simplistic shapes from theory: the normal distribution, constant volatility across strikes and terms to expiration, and the upward sloping yield curve are transformed into the complex and evolving structures of financial reality. The central role of this ratio elucidates a previously unknown and important connection between the disparate branches of finance.
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