Complex Systems General Interest
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Complex Systems General Interest
Complex Systems, Computational Social Science, FuturICT
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Bankruptcy cascades in interbank markets: Gabriele Tedeschi, Amin Mazloumian, Mauro Gallegati, Dirk Helbing

Bankruptcy cascades in interbank markets: Gabriele Tedeschi, Amin Mazloumian, Mauro Gallegati, Dirk Helbing | Complex Systems General Interest | Scoop.it

We study a credit network and, in particular, an interbank system with an agent-based model. To understand the relationship between business cycles and cascades of bankruptcies, we model a three-sector economy with goods, credit and interbank market. In the interbank market, the participating banks share the risk of bad debits, which may potentially spread a bank’s liquidity problems through the network of banks. Our agent-based model sheds light on the correlation between bankruptcy cascades and the endogenous economic cycle of booms and recessions. It also demonstrates the serious trade-off between, on the one hand, reducing risks of individual banks by sharing them and, on the other hand, creating systemic risks through credit-related interlinkages of banks. As a result of our study, the dynamics underlying the meltdown of financial markets in 2008 becomes much better understandable.


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Financial price dynamics and pedestrian counterflows: A comparison of statistical stylized facts

Financial price dynamics and pedestrian counterflows: A comparison of statistical stylized facts | Complex Systems General Interest | Scoop.it

Financial price dynamics and pedestrian counterflows: A comparison of statistical stylized facts

Daniel R. Parisi, Didier Sornette, and Dirk Helbing

Accepted Friday Dec 14, 2012

We propose and document the evidence for an analogy between the dynamics of granular counter-flows in the presence of bottlenecks or restrictions and financial price formation processes. Using extensive simulations, we find that the counter-flows of simulated pedestrians through a door display eight stylized facts observed in financial markets when the density around the door is compared with the logarithm of the price. Finding so many stylized facts is very rare indeed among all agent-based models of financial markets. The stylized properties are present already when the agents in the pedestrian model are assumed to display a zero-intelligent behavior. If agents are given decision-making capacity and adapt to partially follow the majority, periods of herding behavior may additionally occur. This generates the very slow decay of the autocorrelation of absolute return due to an intermittent dynamics. Our finding suggest that the stylized facts in the fluctuations of the financial prices result from a competition of two groups with opposite interests in the presence of a constraint funneling the flow of transactions to a narrow band of prices with limited liquidity.


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