  We describe a simple model for speculative trading based on adaptive behavior
of economic agents.The adaptive behavior is expressed through a feedback
mechanism for changing agents' stock-to-bond ratios, depending on the past
performance of their portfolios.The stock price is set according to the
demand-supply for the asset derived from the agents' target risk levels. Using
the methodology of agent-based modeling we show that agents, acting
endogenously and adaptively, create a persistent price bubble. The price
dynamics generated by the trading process does not reveal any singularities,
however the process is accompanied by growing aggregated risk that indicates
increasing likelihood of a crash.
