Using Agent-Based Models for Analyzing Threats to Financial Stability

24 Pages Posted: 13 Aug 2015

Date Written: December 21, 2012

Abstract

Existing models of financial instability tend to be based on top-down, partial-equilibrium views of markets and their interactions; they are unable to incorporate the complexity of behavior among heterogeneous firms or the tendency for all types of firms to change their behavior during a crisis. This paper argues that agent-based models (ABMs) — which seek to explain how the behavior of individual firms or “agents” can affect outcomes in complex systems — can make an important contribution to our understanding of potential vulnerabilities and paths through which risks can propagate across the financial system.

Suggested Citation

Bookstaber, Richard M., Using Agent-Based Models for Analyzing Threats to Financial Stability (December 21, 2012). OFR 0003, Available at SSRN: https://ssrn.com/abstract=2642420 or http://dx.doi.org/10.2139/ssrn.2642420

Richard M. Bookstaber (Contact Author)

Fabric RQ ( email )

900 Pearl Street
Boulder, CO 80302
United States

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