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SUMMARY:Computer Simulation of the Financial Markets - Mr Christopher Clac
 k\, Direct of Financial Computer at UCL
DTSTART:20100226T170000Z
DTEND:20100226T180000Z
UID:TALK23495@talks.cam.ac.uk
CONTACT:Rachel Marston
DESCRIPTION:This talk starts with a brief introduction to the Financial Se
 rvices Knowledge Transfer Network (KTN)\, which is the ESRC's delivery veh
 icle to ensure "impact" in all research relating to financial services. Th
 e main section of the talk then focuses on one area of specific concern to
  industry - understanding the dynamic behaviour of the financial markets.\
 nOver the past decade the international financial markets have become incr
 easingly vulnerable to global contagion - due to factors that include incr
 eased connectivity and novel financial instruments. Complex financial inst
 ruments that were designed with the intention of spreading risk (and there
 by reducing risk per institution) perversely increased risk for all as the
  markets destabilised. It is conjectured that the international markets ar
 e now increasingly liable to move into non-equilibrium states\, and that u
 nderstanding of the non-equilibrium states is therefore of overriding impo
 rtance not only to financial institutions but also to economies and govern
 ments.\nEquilibrium states are reasonably well understood and amenable to 
 standard economic models. But the non-equiibrium states are intractable to
  such methods. One solution is to use computer simulation\, which has been
  used successfully in many other industries\, and has already been used in
  small-scale models by several economists. In this talk I will describe ho
 w such computer models and simulations work\; how they differ from traditi
 onal analytical methods\; how they harness "artificial intelligence" techn
 ology such as Genetic Algorithms and Genetic Programming\; what types of q
 uestion they can answer\; and what types of question they can never answer
 . \nThe talk ends with a conjectured view of the future - of the potential
  for massive simulations of non-equilibrium dynamics to answer questions a
 bout systemic stability at a global level. I will describe what level of c
 omputer resource would be necessary (and the extent to which it exists)\, 
 and the level of multi-disciplinary collaboration that would be required.
LOCATION:Winstanley Lecture Hall\, Trinity College
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