We develop an agent-based model in which heterogeneous and boundedly rational agents interact by trading a risky asset at an endogenously set price. Agents are endowed with balance sheets comprising the risky asset as well as cash on the asset side and equity capital as well as debt on the...

We develop an agent-based model in which heterogenous and boundedly rational agents interact by trading a risky asset at an endogenously set price. Agents are endowed with balance sheets comprising the risky asset as well as cash on the asset side and equity capital as well as debt on the...

We develop a general model of the financial system that allows for the evaluation of bank regulation. Our framework comprises the agents and institutions that have proved crucial in the propagation of the subprime mortgage shock in the U.S. into a global financial crisis: Commercial banks and...