A Flaw in the Model… That Defines How the World Works

Bieta, Volker; Milde, Hellmuth; Weber, Nadine

dc.creator	Bieta, Volker
dc.creator	Milde, Hellmuth
dc.creator	Weber, Nadine
dc.date	2012-03-19T18:43:17Z
dc.date	2012-03-19T18:43:17Z
dc.date	2010-12-01
dc.date.accessioned	2023-02-17T21:07:01Z
dc.date.available	2023-02-17T21:07:01Z
dc.identifier	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20101208092950
dc.identifier	http://hdl.handle.net/10986/3980
dc.identifier.uri	http://localhost:8080/xmlui/handle/CUHPOERS/244950
dc.description	The authors of this paper claim that modeling financial markets based on probability theory is a severe systematic mistake that led to the global financial crisis. They argue that the crisis was not just the result of risk managers using outdated financial data, but that the employed efficiency model -- also referred to as the stochastic model -- is basically flawed. In an exemplary way, the analysis proves that this model is unable to account for interactions between market participants, neglects strategic interdependences, and hence leads to erroneous solutions. The central message is that the existing efficiency model should be replaced by an approach using agent-based scenario analysis.
dc.language	English
dc.relation	Policy Research working paper ; no. WPS 5498
dc.rights	CC BY 3.0 IGO
dc.rights	http://creativecommons.org/licenses/by/3.0/igo/
dc.rights	World Bank
dc.subject	ACCOUNTING
dc.subject	AGENCY PROBLEMS
dc.subject	AMOUNT OF CAPITAL
dc.subject	ASYMMETRIES OF INFORMATION
dc.subject	BANKING INDUSTRY
dc.subject	BANKING SECTOR
dc.subject	BENEFICIARY
dc.subject	CASH FLOW
dc.subject	CASH FLOWS
dc.subject	COLLATERAL
dc.subject	COLLATERALS
dc.subject	CONFLICTS OF INTEREST
dc.subject	CORPORATE FINANCE
dc.subject	CREDIT CONTRACT
dc.subject	CREDITOR
dc.subject	DEBT
dc.subject	DEBT FINANCING
dc.subject	DEBTOR
dc.subject	DECISION MAKING
dc.subject	DERIVATIVE
dc.subject	DERIVATIVES
dc.subject	ECONOMICS
dc.subject	EFFICIENT MARKET
dc.subject	EFFICIENT OUTCOMES
dc.subject	EQUITY FINANCING
dc.subject	FEDERAL REGULATORS
dc.subject	FEDERAL RESERVE
dc.subject	FEDERAL RESERVE SYSTEM
dc.subject	FINANCIAL ASSET
dc.subject	FINANCIAL ASSETS
dc.subject	FINANCIAL CRISIS
dc.subject	FINANCIAL DATA
dc.subject	FINANCIAL INSTRUMENTS
dc.subject	FINANCIAL MARKET
dc.subject	FINANCIAL MARKETS
dc.subject	FREE MARKETS
dc.subject	FUTURE CASH FLOWS
dc.subject	GAME THEORY
dc.subject	GOVERNMENT REFORM
dc.subject	HIGH INTEREST RATE
dc.subject	INFORMATION ASYMMETRY
dc.subject	INFORMATIONAL ASYMMETRY
dc.subject	INTEREST RATE
dc.subject	INTEREST RATES
dc.subject	INTERNATIONAL BANK
dc.subject	LOW INTEREST RATE
dc.subject	MARKET PARTICIPANT
dc.subject	MARKET PARTICIPANTS
dc.subject	MARKET PRICES
dc.subject	MATURITY
dc.subject	NASH EQUILIBRIUM
dc.subject	PERFECT COMPETITION
dc.subject	PERFECT MARKETS
dc.subject	PORTFOLIO
dc.subject	PRICE TAKERS
dc.subject	RANDOM WALK
dc.subject	REAL ESTATE
dc.subject	RESOURCE MOBILIZATION
dc.subject	RISK NEUTRAL
dc.subject	STATISTICAL DATA
dc.subject	SUBVENTIONS
dc.subject	WEALTH
dc.title	A Flaw in the Model… That Defines How the World Works
dc.type	Publications & Research :: Policy Research Working Paper
dc.coverage	The World Region
dc.coverage	The World Region