Comment by manmal
2 hours ago
About your first example, isn’t the butterfly effect preventing this from being useful? One agent in your simulation decides to sell, and starts an avalanche, that won’t happen in reality?
2 hours ago
About your first example, isn’t the butterfly effect preventing this from being useful? One agent in your simulation decides to sell, and starts an avalanche, that won’t happen in reality?
When you run tens of thousands of simulations for complex economic models, you actually do want to see the extreme outliers too. I can't recall who said it, but in finance the interconnected incentives make so-called Black Swan events much more likely and frequent than models or theories can comfortably account for.
In a way... when it's finance, they should be maybe called Gray'ish Swans?