FOUNDER DIRECTOR (2002-2009 July)
2013 designedNew Post Crisis Economics Masters MSc Computational Economics, Financial Markets and Policy.
|Network methods for systemic risk indices for early warning|
|The integration of systemic risk analysis and stress testing|
|Carry trades and agent based models.|
For Sheri's critique on why there are serious legacy problems at
as the IMF to move on from perspectives and models (heavy with implausible
assumptions and poor data resolution ) that got us into deep trouble with the 2007
22 April 2016
BoE paper seeks unified global approach to NPLs
David Bholat, Rosa Lastra, Sheri Markose, Andrea
Miglionico and Kallol Sen tackle the
legal, accounting, statistical, economic and strategic aspects of the problem of NPLs in their
29 March 2016
Sheri Markose Invited Speaker at
International Centre for Mathematical Studies, Edinburgh
22 January 2016 Bruegel, Brussels, Belgium
The Bank of England in Europe: Does EU membership constrain non- Euro central banks?
The ECB and its response to crises in the
euro area have been in the spotlight recently.
But, how does EU membership affect the central banks of non-Euro member states? This
question is especially pertinent in the UK, whose relationship with the EU is at a vital
Bruegel welcomes Jon Cunliffe,
Deputy Governor for Financial Stability at
the Bank of England, who will present the Bank’s report. This will be followed by a
discussion of the findings with Sheri Markose, University of Essex, and Matt Holmes,
24 November 2015 Bruegel, Brussels, Belgium
IMF Director José Viñals will
discuss the 2015 October IMF Global Financial
Stability Report. He will suggest that an urgent policy upgrade is vital to normalise
monetary and financial conditions and to anchor financial stability.
This will be followed by a discussion with Sheri Markose from the University of Essex
and a representative from business, chaired by Bruegel Senior Fellow Nicolas Véron.
For live stream and details see:
5- 12 December 2015
Lectures at Leading
Chinese Universities : Agent based Computational Economics, Digital
Economics and Digital Network Models of the Economy
Considerable swathes of the economy from retail trade, financial
markets, money and
information have gone digital. However, Economics Departments in the UK curtailed in their
capacity to innovate and embrace diversity due to the so called REF (Research Excellence
Framework) which restricts analysis to traditional economic models, have been slow on the
uptake. The lectures I did for the Chinese Universities (and at the HMT mini-conference)
summarizes the vast software developments I with co-authors (mostly CCFEA PhD students) have
done to date on smart markets and digital network models.
Essex University Economics Department is the only UK Economics
Department where there is in Agent based Computational Economics and data driven
Essex University Economics Department is the only UK Economics
Department where there is
in Agent based Computational Economics and data drivenDigital network models
Link to lecture:
Link to lecture:
Sheri will be a speaker
at the 2015 ECMI Conference at
the National Bank of Belgium on
the 20 October to discuss the new EC financial market infrastructure developments in the
context of the European Capital Markets Union. Sheri’s contributions will focus on her
work on reforming the Over-the-Counter (OTC) derivatives reforms which were implicated
in the 2008 financial crisis. This is a high level conference, which includes policy makers
such as Lord Jonathan Hill, European Commissioner for Financial Stability, Financial
Services and Capital Markets Union.
Paper published http://dx.doi.org/10.1016/j.jfs.2015.12.004
Sheri will be giving a talk on
Why Computability and Complexity
Matter In Economics at the Global Systems Sciences Genova Science Festival on 29
On her return from the Athens Summer School when
she had a first hand view of the
Greek Referendum on the 5 July 2015, Sheri wrote a media piece
12 Annual Stochastic Finance Summer School
Athens University of Economics and Business, 76 Patission Street , Athens
Invited Lectures 6-7 July 2015
Sheri will be giving 4 lectures on Systemic Risk and Complexity Economics
Monday 6 July 2015
Morning (2 hours): Introduction to Systemic Risk and
Macro-prudential Modelling: Market Prices Based
Methods v Network Analysis of Financial Interconnections
This lecture covers the desirable characteristics that one needs from
systemic risk indexes. Early warning
signal (avoiding false negatives) is upheld to be high on this list.
lack early warning and may mislead about systemic risk as volatility indexes do. Bilateral asset-liability data
based network models for financial systems are needed to see how procyclical liabilities exceed financial
buffers, leading to system wide instability.
Afternoon (2 hours): Why Topology Matters in Financial Networks:
Granularity, Stability and Tipping
Many influential models have been misleading about the stability of
financial networks by considering
only their connectivity and assuming homogeneity in the number and size of links of nodes. Real world
networks are highly heterogeneous in the number and size of links, increasing connectivity in such systems
can be dangerous.
its spectral properties as a dynamical system gives us a handle in determining financial stability and
points. Both the index of stability of the financial network and the rank order of systemic importance and
vulnerability can be obtained simultaneously as part of the eigen-pair solution.
The challenge is to marry, at a high level of data granularity, the financial networks with the real sectors of
economies, along with a global/cross border dimension for both. Ignoring
cross border imbalances in macro-
prudential policy and systemic risk modelling is a fatal error. Hence,
it is important to combine cross
border imbalances with within country sectoral imbalances that have emerged with the growing size of the
financial sector (including housing and mortgages) a la Carvalho-Gabaix-Acemeglu granular macro-economics.
Specific analysis of the Euro zone core-periphery crisis will be done.
There is a fundamental non-computability at the heart of economic interactions that economists have hitherto
ignored. It is the basis of organized complexity that produces highly contextual innovations and structure
changing dynamics as in arms races.
agents who can perceive opposition or contrarian/anti-coordinated structures. Fixed points involving
contrarian interactions cannot be computed. These can become launch pads for protean behaviours that can
produce novel objects and surprises. Evidence for such mutual mentalizing is given from latest discoveries in
neuroscience on mirror neurons by Vittorio Gallesse et. al. and also from the work of Scot Kelso, who
identified neuro markers for anti-coordination and opposition.
16 January 2015
Contributed to the Bank of
England Granular Data Workshop; Invited to Bank
of England and US Office of Financial Research Collaboration for Standards For
5 Dec 2014 Invited Speaker
Joint UNamur-UCL Winter School and Workshop on Networks in Economics and Finance
at HM Treasury Mini Conference on Agent
Based Models :50 Anniversary Events for the Government Economic Services,
Chaired by James Richardson (Director, Fiscal Group, HMT, ESRC Council Member)
at Challenges for
Global Financial Markets Plenary
Global Systems Sciences, EC, Brussels Workshop.
19 May 2014
Sheri was a speaker at the
19 May 2014 - Joint OECD-ECLAC
Workshop, 'Workshop on New Tools and Methods for Policy-making'.
Markose of the Economics Department of the University who is well known
a pioneer of complexity economics and the use of financial network models for macro-prudential
policy, is pictured here at the OECD with Angel Gurría, Secretary-General of the OECD and also leading economist, Alan Kirman, and the econo-physicist, Doyne Farmer.
The OECD has launched a forum for
New Approaches to Economic Challenges
to try and
counter group think among OECD economists and also their adherence to mainstream
macroeconomic models which were found to be mostly irrelevant for the problems thrown up by the 2007 crisis and Great Recession.
London School of Economics, Systemic Risk
Centre, Why we need new models of the economy, Conference on
Towards a Sustainable Financial System. See more at: http://www.systemicrisk.ac.uk/events/towards-sustainable-financial-system
Talk on youtube: https://www.youtube.com/watch?v=9G0PYZ28N0U&feature=youtu.be
Conference Report now available conference report
University of Essex , UK
24-25 February 2014
This ESRC conference, cohosted
with the Economics Department of the University of Essex
and organized by
Sheri Markose, will critically examine established thinking and bring together a range of new perspectives on
identifying future directions for macroeconomics and policy. It will address developments from at least three
new branches of economics: agent-based computational, complexity and behavioural economics - arising
from highly interdisciplinary studies of computational and digital technologies, complexity sciences and
neuro-physiology of the brain.
behavioural macroeconomics, financial macro-nets, agent based models for
systemic risk and
how to deal with uncertainty and complexity in policy. Speakers include practitioners such as Neil Erickson
(Fed Reserve), Sujit Kapadia (Bank of England), David Miles (Monetary Policy Committee) and James
Richardson (HMT, ESRC Council), and academics, Michelle Baddeley, Doyne Farmer, Charles Goodhart, Ithzak Gilboa, Paul de Grauwe, Sheri Markose, Marcus Miller and KathyYuan.
In order to better understand herding
and anti-herding that are key to boom-bust cycles, leading neuro-
scientists Vittorio Gallese and Scot Kelso will speak on mirror neurons and their role in social cognition,
mimetic behaviours and also anti-coordination necessary for innovation.
For further information see, http://www.essex.ac.uk/economics/news_and_seminars/ESRC.aspx
Sheri has been appointed from February-June
2014 to the European Science
Foundation Review Panel in area of Socio- Economic Risks
December 11 2013 Visit to Banque de France Invited by
Director of Financial
Stability Laurent Clerc
“Systemic Importance in Multi-Layer Financial
Networks: The Case of Derivatives Markets” Talk by Sheri Markose
Afternoon Session: Discussion on
Assessment of OTC Derivatives Regulatory Reforms (MAGD Report)
commissioned by the Banking Committee for Banking Supervision (BCBS) and
Financial Stability Board
September 9-10, 2013 Invited Talk and Visit at OECD, Paris
OECD Seminar Programme
Systemic Risk Analysis in Finance : New Approaches and Tools
By Sheri Markose, University of Essex, UK
September 9th, 2013, 12 – 2 pm
OECD Headquarters, CC Room CC12
Laurent Clerc, Director Financial Stability, Banque de France
Jorgen Elmeskov, Deputy Chief-Economist, OECD
Her talks are based on a recent overview paper published in
Risk Analytics: A Data Driven Multi-Agent ", Journal
of Banking Regulation , Special Issue on Regulatory Data and
Financial Network (MAFN) Approach
Systemic Risk Analytics.
of Banking Regulation
, Special Issue on Regulatory Data and
be conferring with OECD researchers and policy makers over the two days (NAEC)
on issues that are close to the OECD New Approaches to Economic Challenges
Specifically: NAEC aims to improve our understanding of the complex and
interconnected nature of
the global economy and find better ways to deal with
policy trade-offs and synergies, such as between
and the environment.
Sheri Markose designs
New interdisciplinary and revolutionary MSc
Computational Economics, Financial Markets and Policy admitting students for
October 2013 at the Economics Department of the University of Essex
is the first post graduate degree involving agent based models,
networks and complexity economics being offered in a top UK Economics Department. For course details see
Uniquely, due to a dearth of PG training in these areas the new MSc is
opening its core
new modules to Doctoral Students and professional economists on an Occasional
Student basis. See, UniqueACEDoctoralTraining
May 16-17, 2013 , Invited Speaker on Policy Analysis: Modelling Systemic Risk
XV Annual Seminar of the Banco Central do Brasil , Rio de Janeiro. During her
visit, Sheri will be conferring with leading researchers and policy makers on
macro-prudential policy at the Central Bank of Brazil on how to monitor and manage
systemic risk using financial network analysis and a complexity perspective.
,The future of regulatory data and analytics
,Dining Room A, House of Commons, London, SW1A 0AA
comments at CCFEA 10 Anniversary
Sheri will be giving two lectures on
Systemic Risk Modelling Using Network
Analysis and Policy Design from a Complex Adaptive System Perspective at the Kiel Institute for the World Economy Summer School, June 24-30, 2012.
Speakers include :
Jean-Claude Trichet ( former President, ECB)
Tommaso Monacelli ( Bocconi University)
Sheri Markose ( University of Essex)
Werner DeBondt (De Paul University, Chicago)
Enrique Mendoza ( University of Maryland )
Lecture 1: Eigen-Pair Analysis of Financial Systemic Risk and Design of Super-Spreader Tax To Mitigate Moral Hazard (Slides)
Lecture 2: Design of Robust Macro-prudential Policy: Why a new complexity approach and MAFNs ? (Slides)
Sheri Markose was appointed by the Department of
Monetary and Capital Markets of the
International Monetary Fund to lead research on a project on modelling systemic risk from financial
derivatives. She visited the IMF, 6-9 December 2011 to present her results. She has characterized
the phenomenon of too interconnected to fail (TITF) as one in which the failure of a highly
connected large complex financial intermediary (FI) can bring down the top tier of 22 clustered
similarly connected FIs. She has designed a super-spreader tax based on the eigenvector centrality
of the LCFIs so that they internalize the cost of their systemic risk to the rest of the system. The
highly tiered structure of the derivatives market enables her to construct a lite superspreader tax
escrow fund of only $40 bn which can prevent the failure of the highly unstable $650 trillion global derivatives market.
Sheri Markose Presentation of IMF Project Results on Systemic Risk From Financial
Derivatives: A Network Analysis and Mitigation of Contagion Effects With Super-Spreader Tax Slides
The software for systemic risk and network analysis was developed by Sheri Markose with Simone Giansante and Ali Rais Shaghaghi.
22 March 2011: Essex Professor appointed to advise Indian central bank
Sheri has been invited to be
Global Economic Symposium 2011, on the
session on "Coping with Systemic Risk ". She has been encouraged to give radically new
ideas that have the promise of being paradigm shifts, and also give feedback on the
challenge and suggestions on potential solutions. GES 2011 is being held on Oct 5-6, 2011 at Kiel, Germany.
Sheri Markose and Amadeo Alentorn
have finally got their paper
“The Generalized Extreme Value (GEV)Distribution, Implied Tail
Index and Option Pricing
Journal of Derivatives. Spring edition, Volume 18, No 3, 2011.
Stephen Figlewski (JOD Editor) and a referee said that the paper was
'illuminating' about the behaviour of fat tailed (GEV Frechet ) distributions for asset returns under extreme market conditions.
Markose & Alentorn obtain a close form solution for the GEV option price. They say:
"We find that the traded option price implied GEV model for the Risk Neutral Density (RND)yields results that
strongly challenge traditionally held views on tail behaviour of asset returns based on Gaussian distributions
which predicate simultaneous existence of thin tails in both directions during all market conditions. The GEV
distribution for asset prices which is governed by the tail shape parameter is found to switch tail shape with
underlying market conditions. Further, a non-zero value for the tail shape parameter results in significant
skewness in the probability mass of the GEV density function during extreme market conditions which implies
large one directional movements and truncation in the probability mass in the other direction. During extreme
market drawdowns, a positive value for the tail shape parameter of the GEV RND function for losses implies
extreme price drops with the large probability mass on the right and a finite tail in the other direction implying
an upper bound on possible gains. To date, proposed option pricing models intended to deal with both the
fat tail and the skew in asset returns have failed to highlight the above characteristic features of fat tailed distributions."
All Matlab codes for the GEV option pricing model, GEV RND implied statistics such as volatility, Extreme Economic VaR etc. will soon be available at http://www.acefinmod.com/index.html . .