We propose an early warning model for predicting the likelihood of a financial stress event for a given future time, and examine whether credit plays an important role in the model as a non-linear propagator of shocks. This propagation takes the form of a threshold regression in which a regime...

Volatility clustering and fat tails are prominently observed in financial markets. Here, we analyze the underlying mechanisms of three agent-based models explaining these stylized facts in terms of market instabilities and compare them on empirical grounds. To this end, we first develop a...