Recreating the Algorithm That Almost Broke Wall Street

The 2010 Flash Crash wiped out $1 trillion in minutes. This article offers a detailed agent-based simulation to analyze the crash phase by phase, highlighting how algorithmic trading, liquidity issues, and trader behavior interact to cause—and potentially prevent—such events

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Abstract, Acknowledgements, and Statements and Declarations

References and Appendices

2.2 Flash Crash Episodes

During the 2010 Flash Crash, over a trillion dollars were wiped off the value of US equity markets in an event that has been largely attributed to the rapid rise of algorithmic trading and high-frequency trading Kirilenko et al. (2017). The base indices in both the futures and securities market experienced a rapid price fall of more than 5% in just several minutes, after which the bulk of the price drop was recovered nearly as fast as it fell. The staff from CFTC and SEC present a ...