Tag Archives: agent-based model

Forming strong bonds: dynamics in corporate bond markets

Karen Braun-Munzinger, Zijun Liu and Arthur Turrell.

If a boat is unstable and someone jumps out, does it capsize the boat for everyone else? In a novel application of agent-based modelling, we examine how investors redeeming the corporate bonds held for them by open-ended mutual funds can cause feedback loops in which bond prices fall further, posing risks to financial stability. In our model, reducing the speed with which investors pull out their investments over time helps to keep prices stable and remaining investors’ savings on an even keel.

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Filed under Financial Markets, Financial Stability, Macroprudential Regulation