Heterogeneous agent models (HAMs) in finance and economics are often characterised by high dimensional nonlinear stochastic differential or difference systems. Because of the complexity of the interaction between the nonlinearities and noise, a commonly used, often called indirect, approach to...

In this paper a simulation approach for defaultable yield curves is developed within the Heath et al. (1992) framework. The default event is modelled using the Cox process where the stochastic intensity represents the credit spread. The forward credit spread volatility function is affected by...

Financial markets are typically characterized by high (low) price level and low (high) volatility during boom (bust) periods, suggesting that price and volatility tend to move together with different market conditions/states. By proposing a simple heterogeneous agent model of fundamentalists and...

This paper examines the dynamics of financial distress and in particular the mechanism of transmission of shocks from the financial sector to the real economy. The analysis is performed by representing the linkages between microeconomic financial variables and the aggregate performance of the...

Merton has provided a formula for the price of a European call option on a single stock where the stock price process contains a continuous Poisson jump component, in addition to a continuous log-normally distributed component. In Merton's analysis, the jump-risk is not priced. Thus the...

The paper presents an agent based model to study the possible effects of different fiscal and monetary policies in the context of debt deflation. We introduce a modified Taylor rule which includes the financial position of firms as a target. Monte Carlo simulations show that an excessive...

In this paper we study the implications of the present broad banking system for macroeconomic stability. We show that when commercial banks are allowed to trade in financial assets (here equities) as a substitute for traditional lending, the macroeconomic system is likely to be an unstable one....

Hyman Minsky is renowned for his theoretical and empirical investigation of the capitalist economy. In this book, a distinguished group of contributors provides an authoritative account of his contribution to the analysis of capitalism and, more particularly, to the fields of monetary and post...

Inspired by the theoretically oriented dynamic analysis of moving average rules in the model of Chiarella, He, and Hommes (CHH) [<italic>Journal of Economic Dynamics and Control</italic> 30 (2006), 1729—1753], this paper conducts a dynamic analysis of a more realistic microstructure model of continuous double...