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      Real-time extended psychophysiological analysis of financial risk processing

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          Abstract

          We study the relationships between the real-time psychophysiological activity of professional traders, their financial transactions, and market fluctuations. We collected multiple physiological signals such as heart rate, blood volume pulse, and electrodermal activity of 55 traders at a leading global financial institution during their normal working hours over a five-day period. Using their physiological measurements, we implemented a novel metric of trader’s “psychophysiological activation” to capture affect such as excitement, stress and irritation. We find statistically significant relations between traders’ psychophysiological activation levels and such as their financial transactions, market fluctuations, the type of financial products they traded, and their trading experience. We conducted post-measurement interviews with traders who participated in this study to obtain additional insights in the key factors driving their psychophysiological activation during financial risk processing. Our work illustrates that psychophysiological activation plays a prominent role in financial risk processing for professional traders.

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          Most cited references43

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          Emotion and Decision Making

          A revolution in the science of emotion has emerged in recent decades, with the potential to create a paradigm shift in decision theories. The research reveals that emotions constitute potent, pervasive, predictable, sometimes harmful and sometimes beneficial drivers of decision making. Across different domains, important regularities appear in the mechanisms through which emotions influence judgments and choices. We organize and analyze what has been learned from the past 35 years of work on emotion and decision making. In so doing, we propose the emotion-imbued choice model, which accounts for inputs from traditional rational choice theory and from newer emotion research, synthesizing scientific models.
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            Stress and disorders of the stress system.

            All organisms must maintain a complex dynamic equilibrium, or homeostasis, which is constantly challenged by internal or external adverse forces termed stressors. Stress occurs when homeostasis is threatened or perceived to be so; homeostasis is re-established by various physiological and behavioral adaptive responses. Neuroendocrine hormones have major roles in the regulation of both basal homeostasis and responses to threats, and are involved in the pathogenesis of diseases characterized by dyshomeostasis or cacostasis. The stress response is mediated by the stress system, partly located in the central nervous system and partly in peripheral organs. The central, greatly interconnected effectors of this system include the hypothalamic hormones arginine vasopressin, corticotropin-releasing hormone and pro-opiomelanocortin-derived peptides, and the locus ceruleus and autonomic norepinephrine centers in the brainstem. Targets of these effectors include the executive and/or cognitive, reward and fear systems, the wake-sleep centers of the brain, the growth, reproductive and thyroid hormone axes, and the gastrointestinal, cardiorespiratory, metabolic, and immune systems. Optimal basal activity and responsiveness of the stress system is essential for a sense of well-being, successful performance of tasks, and appropriate social interactions. By contrast, excessive or inadequate basal activity and responsiveness of this system might impair development, growth and body composition, and lead to a host of behavioral and somatic pathological conditions.
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              Stress and Heart Rate Variability: A Meta-Analysis and Review of the Literature

              Objective Physical or mental imbalance caused by harmful stimuli can induce stress to maintain homeostasis. During chronic stress, the sympathetic nervous system is hyperactivated, causing physical, psychological, and behavioral abnormalities. At present, there is no accepted standard for stress evaluation. This review aimed to survey studies providing a rationale for selecting heart rate variability (HRV) as a psychological stress indicator. Methods Term searches in the Web of Science®, National Library of Medicine (PubMed), and Google Scholar databases yielded 37 publications meeting our criteria. The inclusion criteria were involvement of human participants, HRV as an objective psychological stress measure, and measured HRV reactivity. Results In most studies, HRV variables changed in response to stress induced by various methods. The most frequently reported factor associated with variation in HRV variables was low parasympathetic activity, which is characterized by a decrease in the high-frequency band and an increase in the low-frequency band. Neuroimaging studies suggested that HRV may be linked to cortical regions (e.g., the ventromedial prefrontal cortex) that are involved in stressful situation appraisal. Conclusion In conclusion, the current neurobiological evidence suggests that HRV is impacted by stress and supports its use for the objective assessment of psychological health and stress.
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                Author and article information

                Contributors
                Role: ConceptualizationRole: Data curationRole: Formal analysisRole: InvestigationRole: MethodologyRole: SoftwareRole: ValidationRole: VisualizationRole: Writing – original draftRole: Writing – review & editing
                Role: ConceptualizationRole: Data curationRole: Formal analysisRole: InvestigationRole: MethodologyRole: SoftwareRole: ValidationRole: VisualizationRole: Writing – original draftRole: Writing – review & editing
                Role: Data curationRole: Software
                Role: Data curation
                Role: ConceptualizationRole: InvestigationRole: MethodologyRole: SupervisionRole: ValidationRole: Writing – review & editing
                Role: ConceptualizationRole: InvestigationRole: MethodologyRole: Project administrationRole: ResourcesRole: SupervisionRole: ValidationRole: Writing – original draftRole: Writing – review & editing
                Role: Editor
                Journal
                PLoS One
                PLoS One
                plos
                PLoS ONE
                Public Library of Science (San Francisco, CA USA )
                1932-6203
                2022
                25 July 2022
                : 17
                : 7
                : e0269752
                Affiliations
                [1 ] MIT Laboratory for Financial Engineering, Cambridge, Massachusetts, United States of America
                [2 ] Operations Research Center, Massachusetts Institute of Technology, Cambridge, Massachusetts, United States of America
                [3 ] Department of Electrical Engineering and Computer Science, Massachusetts Institute of Technology, Cambridge, Massachusetts, United States of America
                [4 ] MIT Sloan School of Management, Cambridge, Massachusetts, United States of America
                [5 ] Computer Science and Artificial Intelligence Laboratory, Massachusetts Institute of Technology, Cambridge, Massachusetts, United States of America
                [6 ] Department of Computer Science and Engineering, Michigan State University, East Lansing, MI, United States of America
                [7 ] Ghamut Corporation, East Lansing, MI, United States of America
                Vilnius University, LITHUANIA
                Author notes

                Competing Interests: AWL reports personal investments in private biotechnology companies, biotechnology venture capital funds, and mutual funds. AWL is a co-founder and principal of QLS Advisors LLC, a healthcare investments advisor, and QLS Technologies LLC, a healthcare analytics and consulting company; a director of AbCellera, Annual Reviews, Atomwise, BridgeBio Pharma, and Roivant Sciences; and an advisor to Apricity Health, Aracari Bio, BrightEdge Impact Fund, Enable Medicine, FINRA, Lazard, NIH/NCATS, Quantile Health, SalioGen Therapeutics, Swiss Finance Institute, and Thal?s. During the most recent six-year period, AWL has received speaking/consulting fees from AbCellera, AlphaSimplex Group, Annual Reviews, Apricity Health, Aracari Bio, Atomwise, Bernstein Fabozzi Jacobs Levy Award, BridgeBio, Cambridge Associates, Chicago Mercantile Exchange, Enable Medicine, Financial Times Prize, Harvard Kennedy School, IMF, Journal of Investment Management, Lazard, National Bank of Belgium, New Frontier Advisors/Markowitz Award, Oppenheimer, Princeton University Press, Q Group, QLS Advisors, Quantile Health, Research Affiliates, Roivant Sciences, SalioGen Therapeutics, Swiss Finance Institute, and WW Norton. MS, QX, SJW, TH and MMG report no competing interests. There are no patents, products in development or marketed products associated with this research to declare. I confirm that competing interest doesn’t alters the data availability statement given by authors.

                Author information
                https://orcid.org/0000-0002-0823-2629
                https://orcid.org/0000-0003-3342-1795
                Article
                PONE-D-22-05649
                10.1371/journal.pone.0269752
                9312384
                35877608
                0354197c-02fa-4500-bc47-830898cd68a0
                © 2022 Singh et al

                This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

                History
                : 24 February 2022
                : 27 May 2022
                Page count
                Figures: 2, Tables: 2, Pages: 15
                Funding
                The author(s) received no specific funding for this work.
                Categories
                Research Article
                Social Sciences
                Economics
                Finance
                Social Sciences
                Economics
                Financial Markets
                Biology and Life Sciences
                Psychology
                Emotions
                Social Sciences
                Psychology
                Emotions
                Biology and Life Sciences
                Neuroscience
                Cognitive Science
                Cognitive Psychology
                Decision Making
                Biology and Life Sciences
                Psychology
                Cognitive Psychology
                Decision Making
                Social Sciences
                Psychology
                Cognitive Psychology
                Decision Making
                Biology and Life Sciences
                Neuroscience
                Cognitive Science
                Cognition
                Decision Making
                Biology and Life Sciences
                Cell Biology
                Signal Transduction
                Cell Signaling
                Signaling Cascades
                Stress Signaling Cascade
                Medicine and Health Sciences
                Mental Health and Psychiatry
                Psychological Stress
                Biology and Life Sciences
                Psychology
                Psychological Stress
                Social Sciences
                Psychology
                Psychological Stress
                Biology and Life Sciences
                Physiology
                Physiological Parameters
                Body Temperature
                Skin Temperature
                Medicine and Health Sciences
                Cardiology
                Heart Rate
                Custom metadata
                Due to the nature of the study, informed consent was required and the participants of this study did not provide consent for their data—the physiological data collected by the E4 wristbands and the individual financial trading data—to be shared publicly. In addition, due to the terms of a data use agreement between the research team and the global financial institution, we cannot share a de-identified, anonymized minimal dataset. The company is not allowed to disclose sensitive employee data according to the European General Data Protection Regulation (GDPR) regulations which apply globally to any organization that conducts business in the EU. Therefore, the restriction that has been imposed on us is the same as for any research involving similar data at any global financial institution. However, we plan to keep an archival copy of all data used in this study. The institutional representative who will maintain a copy of the data is Jayna Cummings (Assistant Director, MIT Laboratory for Financial Engineering). Her email address is jcummin@ 123456mit.edu . She will store two copies of the data on hard drives in separate and independent locations. The data can be shared with a third-party only if required by law or in the case where participants provide explicit written permission.

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