Report looking at systemic risk arising from computer based trading and connections to the empirical literature on risk.
Financial markets have evolved to become complex adaptive systems which rely on the high communication speeds and processing power of digital systems. Their failure could cause severe disruption to financial services and possibly the wider economy.
This report provides links between the literature on systemic risk and computer-based trading and makes proposals as to how we might develop a more unified approach to systemic risk research.
This review was commissioned as part of the Foresight project on the future of computer trading.