Computational Modelling Group

Evolving Resilience to Leverage Based Crashes

1st July 2011
30th September 2011
Research Team
Ash Booth
Frank McGroarty, Enrico Gerding

Time series of the wealth of hedge funds during a simulation run. Days during which a fund defaults are indicated by red triangles.

The model attempts to simulate agents' behaviour in more detail than previous work and allows us to see how excess leverage (borrowing funds for speculative investments) is a source of increased vulnerability and can act as a stimulus for crashes. The model illustrates how crashes come about as a consequence of synchronisation effects of the various agents in financial markets. The project concludes with recommendations for deeper exploration of risk management strategies using agent based modelling.


Socio-technological System simulation: Economic Networks, Social and Socio-economic Systems

Algorithms and computational methods: Agents

Programming languages and libraries: C++, R

Transdisciplinary tags: Complex Systems