This master thesis presents a work that belongs to what is know as “leverage cycle”. Its focus is to explore what consequences the mechanism of leverage alone has on the dynamics and statistical properties of a market. In the spirit of complexity
economics, we will isolate the mechanism of leverage and examine it through the use of an agent based model.
Our objectives are first, to understand what dynamics arise from the indirect interactions of agents through the price of an asset in a market, and second, to reproduce some properties commonly found in empirical time series such as fat-tailed distribution of refturns, volatility clustering, bubbles and crashes.
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