This study extends established financial market approaches to account for key econophysical attributes, low probability/high impact events, and a market's potential use as early warning for threats. Any disparity between established financial practices and true market conditions may provide incentive for exploitation and may harm national security objectives and interests through cascading effects. These national security concerns may include, in particular, the health of a reserve currency for those countries whose currency serves as one. This is a preferred approach with Unrestricted Warfare-type operations as these techniques may not enable repudiation of the antagonist. Since this approach may remain a strong incentive for such tactics for the foreseeable future, it is imperative to develop techniques that hedge against financial miscalculations and subversive efforts. This research relaxes key assumptions of standard finance theory and applies these approaches to currency dynamics and portfolio selection which provides insight on areas of vulnerability. Early warning measures of threats are developed and compared to critical world events. Vulnerabilities to capital markets are studied, and their effects on reserve currencies are also analyzed. Lastly, a mathematical framework is developed that enables imitation of the aforementioned econophysical attributes in a simulated environment thereby bridging the divide between certain aspects of standard finance theory and econophysics for future study.
Smalenberger, David M., "On Pecuniary Resiliency, Early Warning, and Market Imitation Under Unrestricted Warfare" (2015). Theses and Dissertations. 227.