Justin Lyon explains how agent-based simulation has become even more vital across markets for a post-pandemic world.
The world is irrevocably different. We know we will continue to experience highly amplified shocks as the world becomes more global and interconnected. We as a society cannot continue to ignore the utility of modelling and simulation to help our leaders solve or mitigate problems, such as the pandemic. There is too much at stake. Fire sales and the resulting whipsaws in pricing are endemic to the herding behaviour that both amplifies and reinforces them. It is a trend that will get worse if institutions abdicate their understanding of potential protective measures.
But if leaders and policymakers augment their decision-making with simulation and agent-based modelling (ABM), solutions can be found and agreed early enough to make a difference by preventing much of the damage we inflict on ourselves.
Models are simply representations of objects and things seen in the real world. They can exist only in our minds and can be simple mental models. They can also be codified into software when they are written as formulas and code. These computer models are used to simulate and understand what the model is trying to capture. They help translate data, observations and assumptions into forecasts…
Continue to read this article in the Fintech Times here.