Complex Sciences. Second International Conference, COMPLEX 2012, Santa Fe, NM, USA, December 5-7, 2012, Revised Selected Papers

Research Article

In Search of Prudential Leverage Regulation Regimes

Download
322 downloads
  • @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
Caihong Sun1,*, Wenying Ding1,*, Ruxin Han1,*
  • 1: Renmin University of China
*Contact email: chsun@ruc.edu.cn, dwy1988@163.com, hanruxin888@sohu.com

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.