Onset of financial instability studied via agent-based models

Yi-Fang Liu (), Jørgen Vitting Andersen () and Philippe de Peretti ()
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Yi-Fang Liu: College of Management and Economics - TJU - Tianjin University
Jørgen Vitting Andersen: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique
Philippe de Peretti: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: The mere complexity of scenarios which could lead tothe onset of financial market instability seems to demand new tools, in particular concerning the role of human decision-making during crises. Here we present agent-based models that could provide new insights into the wayperiods of market turmoil unfold. We illustrate the method through a well-controlled setup in a series of experiments. We are thereby able to:i) validate the impact of model parameters and test their relevance by predicting the average outcome of an experiment; andii) consider each individual experiment and predict outcomes through a scenario analysis. These illustrations should show the appeal of the method in applications to real market situations.

Keywords: complex systems; systemic risk; agent based modeling (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-cmp
Note: View the original document on HAL open archive server: https://hal.science/hal-01397400
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Published in Monica Billio, Loriana Pelizzon and Roberto Savona Systemic Risk Tomography: Signals, Measurement and Transmission Channels, ISTE Press Ltd, pp.95-123, 2016, 9780081011768

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