Research Article
In Search of Prudential Leverage Regulation Regimes
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@INPROCEEDINGS{10.1007/978-3-319-03473-7_29, author={Caihong Sun and Wenying Ding and Ruxin Han}, title={In Search of Prudential Leverage Regulation Regimes}, proceedings={Complex Sciences. Second International Conference, COMPLEX 2012, Santa Fe, NM, USA, December 5-7, 2012, Revised Selected Papers}, proceedings_a={COMPLEX}, year={2013}, month={11}, keywords={leverage regulation risk-based policy incentive-based policy}, doi={10.1007/978-3-319-03473-7_29} }- Caihong Sun
Wenying Ding
Ruxin Han
Year: 2013
In Search of Prudential Leverage Regulation Regimes
COMPLEX
Springer
DOI: 10.1007/978-3-319-03473-7_29
Abstract
In year 2009, Thurner, Farmer and Geanakoplos construct an agent-based model of leverage asset purchases with margin calls. The interesting research shows that leverage could cause fat tails and clustered volatility. In this paper, we study the effects of leverage regulation regimes on financial markets based on their model, by introducing two types of leverage regulation policy: risk-based policy and incentive-based policy. Besides examining fat tails and clustered volatility stylized facts, we analyze macroeconomic indicators such as bankruptcy ratio, total social wealth and the efficiency of banking system for identifying prudential leverage regulation regimes.
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