RESEARCH · GLOBAL
Tsallis entropy framework estimates relaxation time in nonextensive financial systems
Method using Euclidean gradient flow on Tsallis entropy to estimate the time required for a nonextensive (power-law, heavy-tailed) financial market to reach equilibrium. Applies to fat-tail regime common in equities and FX.
WHY IT MATTERS
Understanding market relaxation dynamics post-shock (crash, liquidity event) improves VaR backtesting and stress-scenario calibration in risk models that assume non-Gaussian returns.
Source: arXiv · 2026-06-24