| 来源类型 | Article |
| 规范类型 | 其他 |
| DOI | 10.1080/14697688.2012.674301 |
| Leverage causes fat tails and clustered volatility. | |
| Thurner S; Farmer JD; Geanakoplos J | |
| 发表日期 | 2012 |
| 出处 | Quantitative Finance 12 (5): 695-707 |
| 出版年 | 2012 |
| 语种 | 英语 |
| 摘要 | We build a simple model of leveraged asset purchases with margin calls. Investment funds use what is perhaps the most basic financial strategy, called "value investing", i.e. systematically attempting to buy underpriced assets. When funds do not borrow, the price fluctuations of the asset are approximately normally distributed and uncorrelated across time. This changes when the funds are allowed to leverage, i.e. borrow from a bank, which allows them to purchase more assets than their wealth would otherwise permit. During good times, funds that use more leverage have higher profits, increasing their wealth and making them dominant in the market. However, if a downward price fluctuation occurs while one or more funds is fully leveraged, the resulting margin call causes them to sell into an already falling market, amplifying the downward price movement. If the funds hold large positions in the asset, this can cause substantial losses. This in turn leads to clustered volatility: before a crash, when the value funds are dominant, they dump volatility, and after the crash, when they suffer severe losses, volatility is high. This leads to power-law tails, which are both due to the leverage-induced crashes and due to the clustered volatility induced by the wealth dynamics. This is in contrast to previous explanations of fat tails and clustered volatility, which depended on "irrational behavior", such as trend following. A standard (supposedly more sophisticated) risk control policy in which individual banks base leverage limits on volatility causes leverage to rise during periods of low volatility, and to contract more quickly when volatility becomes high, making these extreme fluctuations even worse. |
| 主题 | Advanced Systems Analysis (ASA) |
| 关键词 | Clustered vulnerability Crash Fat tails Leverage Margin calls Systemic risk |
| URL | http://pure.iiasa.ac.at/id/eprint/9943/ |
| 来源智库 | International Institute for Applied Systems Analysis (Austria) |
| 引用统计 | |
| 资源类型 | 智库出版物 |
| 条目标识符 | http://119.78.100.153/handle/2XGU8XDN/129534 |
| 推荐引用方式 GB/T 7714 | Thurner S,Farmer JD,Geanakoplos J. Leverage causes fat tails and clustered volatility.. 2012. |
| 条目包含的文件 | 条目无相关文件。 | |||||
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