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| engineering the financial crisis: Engineering the Financial Crisis Jeffrey Friedman, Wladimir Kraus, 2011-09-01 The financial crisis has been blamed on reckless bankers, irrational exuberance, government support of mortgages for the poor, financial deregulation, and expansionary monetary policy. Specialists in banking, however, tell a story with less emotional resonance but a better correspondence to the evidence: the crisis was sparked by the international regulatory accords on bank capital levels, the Basel Accords. In one of the first studies critically to examine the Basel Accords, Engineering the Financial Crisis reveals the crucial role that bank capital requirements and other government regulations played in the recent financial crisis. Jeffrey Friedman and Wladimir Kraus argue that by encouraging banks to invest in highly rated mortgage-backed bonds, the Basel Accords created an overconcentration of risk in the banking industry. In addition, accounting regulations required banks to reduce lending if the temporary market value of these bonds declined, as they did in 2007 and 2008 during the panic over subprime mortgage defaults. The book begins by assessing leading theories about the crisis—deregulation, bank compensation practices, excessive leverage, too big to fail, and Fannie Mae and Freddie Mac—and, through careful evidentiary scrutiny, debunks much of the conventional wisdom about what went wrong. It then discusses the Basel Accords and how they contributed to systemic risk. Finally, it presents an analysis of social-science expertise and the fallibility of economists and regulators. Engagingly written, theoretically inventive, yet empirically grounded, Engineering the Financial Crisis is a timely examination of the unintended—and sometimes disastrous—effects of regulation on complex economies. |
| engineering the financial crisis: Modern Financial Engineering: Counterparty, Credit, Portfolio And Systemic Risks Giuseppe Orlando, Michele Bufalo, Henry Penikas, Concetta Zurlo, 2021-12-28 The book offers an overview of credit risk modeling and management. A three-step approach is adopted with the contents, after introducing the essential concepts of both mathematics and finance.Initially the focus is on the modeling of credit risk parameters mainly at the level of individual debtor and transaction, after which the book delves into counterparty credit risk, thus providing the link between credit and market risks. The second part is aimed at the portfolio level when multiple loans are pooled and default correlation becomes an important factor to consider and model. In this respect, the book explains how copulas help in modeling. The final stage is the macro perspective when the combination of credit risks related to financial institutions produces systemic risk and affects overall financial stability.The entire approach is two-dimensional as well. First, all modeling steps have replicable programming codes both in R and Matlab. In this way, the reader can experience the impact of changing the default probabilities of a given borrower or the weights of a sector. Second, at each stage, the book discusses the regulatory environment. This is because, at times, regulation can have stricter constraints than the outcome of internal models. In summary, the book guides the reader in modeling and managing credit risk by providing both the theoretical framework and the empirical tools necessary for a modern finance professional. In this sense, the book is aimed at a wide audience in all fields of study: from quants who want to engage in finance to economists who want to learn about coding and modern financial engineering. |
| engineering the financial crisis: Financial Shock Mark Zandi, 2008-07-09 “The obvious place to start is the financial crisis and the clearest guide to it that I’ve read is Financial Shock by Mark Zandi. ... it is an impressively lucid guide to the big issues.” – The New York Times “In Financial Shock, Mr. Zandi provides a concise and lucid account of the economic, political and regulatory forces behind this binge.” – The Wall Street Journal “Aggressive builders, greedy lenders, optimistic home buyers: Zandi succinctly dissects the mortgage mess from start to (one hopes) finish.” – U.S. News and World Report “A more detailed look at the crisis comes from economist Mark Zandi, co-founder of Moody's Economy.com. His “Financial Shock” delves deeply into the history of the mortgage market, the bad loans, the globalization of trashy subprime paper and how homebuilders ran amok. Zandi's analysis is eye-opening. ... he paints an impressive, more nuanced picture.” – Kiplinger's Personal Finance Magazine “If you wonder how it could be possible for a subprime mortgage loan to bring the global financial system and the U.S. economy to its knees, you should read this book. No one is better qualified to provide this insight and advice than Mark Zandi.” –Larry Kudlow, Host, CNBC’s Kudlow & Company “Every once in a while a book comes along that’s so important, it commands recognition. This is one of them. Zandi provides a rilliant blow-by-blow account of how greed, stupidity, and recklessness brought the first major economic crises of the 21st entury and the most serious since the Great Depression.” –Bernard Baumohl,Managing Director, The Economic Outlook Group and best-selling author, The Secrets of Economic Indicators “Throughout the financial crisis Mark Zandi has played two important roles. He has insightfully analyzed its causes and thoughtfully recommended steps to alleviate it. This book continues those tasks and adds a third–providing a comprehensive and comprehensible explanation of the issues that is accessible to the general public and extremely useful to those who specialize in the area.” –Barney Frank, Chairman, House Financial Services Committee The subprime crisis created a gigantic financial catastrophe. What happened? How did it happen? How can we prevent similar crises from happening again? Mark Zandi answers all these critical questions–systematically, carefully, and in plain English. Zandi begins with a fast-paced overview and then illuminates the deepest causes, from the psychology of homeownership to Alan Greenspan’s missteps. You’ll see the home “flippers” at work and the real estate agents who cheered them on. You’ll learn how Internet technology and access to global capital transformed the mortgage industry, helping irresponsible lenders drive out good ones. Zandi demystifies the complex financial engineering that enabled lenders to hide deepening risks, shows how global investors eagerly bought in, and explains how flummoxed regulators failed to prevent disaster, despite crucial warning signs. Most important, Zandi offers indispensable advice for investors who must recognize emerging bubbles, policymakers who must improve oversight, and citizens who must survive whatever comes next. Liar’s loans, flippers, predatory lenders, delusional homebuilders How the housing market came unhinged, and the whirlwind came together Alan Greenspan’s trillion-dollar bet Betting on the boom, ignoring the bubble The subprime market goes global Worldwide investors get a piece of the action–and reap the results Wall Street’s alchemists: conjuring up Frankenstein New financial instruments and their hidden contents Back to the future: risk management for the 21st century Respecting the “animal spirits” that drive even the most sophisticated markets |
| engineering the financial crisis: Crashed Adam Tooze, 2018-08-07 WINNER OF THE LIONEL GELBER PRIZE A NEW YORK TIMES NOTABLE BOOK OF 2018 ONE OF THE ECONOMIST'S BOOKS OF THE YEAR A NEW YORK TIMES CRITICS' TOP BOOK An intelligent explanation of the mechanisms that produced the crisis and the response to it...One of the great strengths of Tooze's book is to demonstrate the deeply intertwined nature of the European and American financial systems.--The New York Times Book Review From the prizewinning economic historian and author of Shutdown and The Deluge, an eye-opening reinterpretation of the 2008 economic crisis (and its ten-year aftermath) as a global event that directly led to the shockwaves being felt around the world today. We live in a world where dramatic shifts in the domestic and global economy command the headlines, from rollbacks in US banking regulations to tariffs that may ignite international trade wars. But current events have deep roots, and the key to navigating today’s roiling policies lies in the events that started it all—the 2008 economic crisis and its aftermath. Despite initial attempts to downplay the crisis as a local incident, what happened on Wall Street beginning in 2008 was, in fact, a dramatic caesura of global significance that spiraled around the world, from the financial markets of the UK and Europe to the factories and dockyards of Asia, the Middle East, and Latin America, forcing a rearrangement of global governance. With a historian’s eye for detail, connection, and consequence, Adam Tooze brings the story right up to today’s negotiations, actions, and threats—a much-needed perspective on a global catastrophe and its long-term consequences. |
| engineering the financial crisis: Financial Engineering Tanya S. Beder, Cara M. Marshall, 2011-06-07 FINANCIAL ENGINEERING Financial engineering is poised for a great shift in the years ahead. Everyone from investors and borrowers to regulators and legislators will need to determine what works, what doesn't, and where to go from here. Financial Engineering part of the Robert W. Kolb Series in Finance has been designed to help you do just this. Comprised of contributed chapters by distinguished experts from industry and academia, this reliable resource will help you focus on established activities in the field, developing trends and changes, as well as areas of opportunity. Divided into five comprehensive parts, Financial Engineering begins with an informative overview of the discipline, chronicling its complete history and profiling potential career paths. From here, Part II quickly moves on to discuss the evolution of financial engineering in major markets fixed income, foreign exchange, equities, commodities and credit and offers important commentary on what has worked and what will change. Part III then examines a number of recent innovative applications of financial engineering that have made news over the past decade such as the advent of securitized and structured products and highly quantitative trading strategies for both equities and fixed income. Thoughts on how risk management might be retooled to reflect what has been learned as a result of the recent financial crisis are also included. Part IV of the book is devoted entirely to case studies that present valuable lessons for active practitioners and academics. Several of the cases explore the risk that has instigated losses across multiple markets, including the global credit crisis. You'll gain in-depth insights from cases such as Countrywide, Société Générale, Barings, Long-Term Capital Management, the Florida Local Government Investment Pool, AIG, Merrill Lynch, and many more. The demand for specific and enterprise risk managers who can think outside the box will be substantial during this decade. Much of Part V presents new ways to be successful in an era that demands innovation on both sides of the balance sheet. Chapters that touch upon this essential topic include Musings About Hedging; Operational Risk; and The No-Arbitrage Condition in Financial Engineering: Its Use and Mis-Use. This book is complemented by a companion website that includes details from the editors' survey of financial engineering programs around the globe, along with a glossary of key terms from the book. This practical guide puts financial engineering in perspective, and will give you a better idea of how it can be effectively utilized in real- world situations. |
| engineering the financial crisis: Codes of Finance Vincent Antonin Lépinay, 2011-08-08 A behind-the-scenes account of the derivatives business at a major investment bank The financial industry's invention of complex products such as credit default swaps and other derivatives has been widely blamed for triggering the global financial crisis of 2008. In Codes of Finance, Vincent Antonin Lépinay, a former employee of one of the world’s leading investment banks, takes readers behind the scenes of the equity derivatives business at the bank before the crisis, providing a detailed firsthand account of the creation, marketing, selling, accounting, and management of these financial instruments—and of how they ultimately created havoc inside and outside the bank. |
| engineering the financial crisis: Adapting to Basel III and the Financial Crisis Peter Miu, Bogie Ozdemir, 2012 As a result of Basel III and Solvency II, all financial institutions will have to re-think their business planning and strategic management practices whilst also trying to meet their income needs. Adapting to Basel III and the Financial Crisis examines how the financial sector is tackling these challenges, drawing on a variety of examples from the banking and insurance industries. |
| engineering the financial crisis: The Federal Reserve and the Financial Crisis Ben Bernanke, 2013-02-24 Collects the transcripts of a series of lectures given by Federal Reserve Chairman Ben Bernanke about the 2008 financial crisis as part of a course at George Washington University on the role of the Federal Reserve in the economy. |
| engineering the financial crisis: After the Great Complacence Ewald Engelen, Ismail Ertürk, Julie Froud, Sukhdev Johal, Adam Leaver, Mick Moran, Adriana Nilsson, Karel Williams, 2011-09-29 Argues that social scientists, governments and citizens need now to re-engage with the political dimensions of financial markets. - cover. |
| engineering the financial crisis: From Asian to Global Financial Crisis Andrew Sheng, 2009-09-28 This is a unique insider account of the new world of unfettered finance. The author, an Asian regulator, examines how old mindsets, market fundamentalism, loose monetary policy, carry trade, lax supervision, greed, cronyism, and financial engineering caused both the Asian crisis of the late 1990s and the current global crisis of 2008-2009. This book shows how the Japanese zero interest rate policy to fight deflation helped create the carry trade that generated bubbles in Asia whose effects brought Asian economies down. The study's main purpose is to demonstrate that global finance is so interlinked and interactive that our current tools and institutional structure to deal with critical episodes are completely outdated. The book explains how current financial policies and regulation failed to deal with a global bubble and makes recommendations on what must change. |
| engineering the financial crisis: Principles of Financial Engineering Robert Kosowski, Salih N. Neftci, 2014-11-26 Principles of Financial Engineering, Third Edition, is a highly acclaimed text on the fast-paced and complex subject of financial engineering. This updated edition describes the engineering elements of financial engineering instead of the mathematics underlying it. It shows how to use financial tools to accomplish a goal rather than describing the tools themselves. It lays emphasis on the engineering aspects of derivatives (how to create them) rather than their pricing (how they act) in relation to other instruments, the financial markets, and financial market practices. This volume explains ways to create financial tools and how the tools work together to achieve specific goals. Applications are illustrated using real-world examples. It presents three new chapters on financial engineering in topics ranging from commodity markets to financial engineering applications in hedge fund strategies, correlation swaps, structural models of default, capital structure arbitrage, contingent convertibles, and how to incorporate counterparty risk into derivatives pricing. Poised midway between intuition, actual events, and financial mathematics, this book can be used to solve problems in risk management, taxation, regulation, and above all, pricing. A solutions manual enhances the text by presenting additional cases and solutions to exercises. This latest edition of Principles of Financial Engineering is ideal for financial engineers, quantitative analysts in banks and investment houses, and other financial industry professionals. It is also highly recommended to graduate students in financial engineering and financial mathematics programs. - The Third Edition presents three new chapters on financial engineering in commodity markets, financial engineering applications in hedge fund strategies, correlation swaps, structural models of default, capital structure arbitrage, contingent convertibles and how to incorporate counterparty risk into derivatives pricing, among other topics - Additions, clarifications, and illustrations throughout the volume show these instruments at work instead of explaining how they should act - The solutions manual enhances the text by presenting additional cases and solutions to exercises |
| engineering the financial crisis: After the Music Stopped Alan S. Blinder, 2013-01-24 The New York Times bestseller Blinder's book deserves its likely place near the top of reading lists about the crisis. It is the best comprehensive history of the episode... A riveting tale. - Financial Times One of our wisest and most clear-eyed economic thinkers offers a masterful narrative of the crisis and its lessons. Many fine books on the financial crisis were first drafts of history—books written to fill the need for immediate understanding. Alan S. Blinder, esteemed Princeton professor, Wall Street Journal columnist, and former vice chairman of the Federal Reserve Board, held off, taking the time to understand the crisis and to think his way through to a truly comprehensive and coherent narrative of how the worst economic crisis in postwar American history happened, what the government did to fight it, and what we can do from here—mired as we still are in its wreckage. With bracing clarity, Blinder shows us how the U.S. financial system, which had grown far too complex for its own good—and too unregulated for the public good—experienced a perfect storm beginning in 2007. Things started unraveling when the much-chronicled housing bubble burst, but the ensuing implosion of what Blinder calls the “bond bubble” was larger and more devastating. Some people think of the financial industry as a sideshow with little relevance to the real economy—where the jobs, factories, and shops are. But finance is more like the circulatory system of the economic body: if the blood stops flowing, the body goes into cardiac arrest. When America’s financial structure crumbled, the damage proved to be not only deep, but wide. It took the crisis for the world to discover, to its horror, just how truly interconnected—and fragile—the global financial system is. Some observers argue that large global forces were the major culprits of the crisis. Blinder disagrees, arguing that the problem started in the U.S. and was pushed abroad, as complex, opaque, and overrated investment products were exported to a hungry world, which was nearly poisoned by them. The second part of the story explains how American and international government intervention kept us from a total meltdown. Many of the U.S. government’s actions, particularly the Fed’s, were previously unimaginable. And to an amazing—and certainly misunderstood—extent, they worked. The worst did not happen. Blinder offers clear-eyed answers to the questions still before us, even if some of the choices ahead are as divisive as they are unavoidable. After the Music Stopped is an essential history that we cannot afford to forget, because one thing history teaches is that it will happen again. |
| engineering the financial crisis: Out of Crisis David A. Westbrook, 2015-12-03 Former Federal Reserve chair Greenspan recently said that the risk management paradigm is broken; thus our understanding of financial regulation no longer makes sense. More generally, the current financial crisis obliges us to rethink the relationships among financial markets and governments. In Out of Crisis financial analyst David Westbrook illuminates the intellectual, business, and policy errors that have led us into the present morass. Through a vivid legal and political analysis he shows how the ideologies of the right and left have distorted financial thinking and policy. Learning from these errors, the book sketches the emergence of a new understanding of risk management and bureaucratic regulation. Out of Crisis begins the tasks of rethinking the structures that constitute financial markets and exploring how such structures may be strengthened. Taking responsibility for the markets we build to do so much of our society's work, we may yet become mature capitalists. |
| engineering the financial crisis: Handbook for Surviving the Global Financial Crisis Barbara Goldsmith, 2009 This book covers: the causes of the crisis; possible outcomes; action steps to protect yourself; a survival plan; future perspective. |
| engineering the financial crisis: Governance and Control of Financial Systems Gunilla Sundström, Erik Hollnagel, 2018-09-03 The recent financial crisis has made it paramount for the financial services industry to find new perspectives to look at their industry and, most importantly, to gain a better understanding of how the global financial system can be made less vulnerable and more resilient. The primary objective of this book is to illustrate how the safety science of Resilience Engineering can help to gain a better understanding of what the financial services system is and how to improve governance and control of financial services systems by leveraging some of its key concepts. Resilience is the intrinsic ability of a system to adjust its functioning prior to, during, or following changes and disturbances, so that it can sustain required operations under both expected and unexpected conditions. This definition is focused on the ability to function, rather than just to be impervious to failure, and thereby bridges the traditional conflict between productivity and safety. The core concept of the book is that the behaviour of the financial services system is the result of the tight couplings among the humans, organizations and technologies that are necessary to provide complex financial functions such as the transfer of economic resources. It is a consequence of this perspective that the risks associated with these systems cannot be understood without considering the nature of these tight couplings. Adopting this perspective, the book is designed to provide some answers to the following key questions about the financial crisis: - What actually happened? - Why and how did it happen? - Could something similar happen again? How can we see that in time and how can we control it? - How can sustainable recovery of the global financial system be established? How can its resilience be improved? |
| engineering the financial crisis: Engineering A Financial Bloodbath: How Sub-prime Securitization Destroyed The Legitimacy Of Financial Capitalism Justin O'brien, 2009-07-13 In July 2007, the then chief executive of Citigroup, Charles Prince, captured the hubris of a market dangerously addicted to debt: “When the music stops, in terms of liquidity, things will be complicated. But as long as music is playing, you have got to get up and dance. We're still dancing.” By the end of the year, Mr Prince was forced to resign along with some of the most influential bankers on Wall Street. Global investment houses in the United States and Europe were forced to turn to sovereign wealth funds for emergency funding. Their rescue comes at a significant material and reputational price.This book investigates the origins and implications of the securitization crisis, described by the chief executive of ANZ as a “financial services bloodbath”. Based on extensive interviews, it offers an integrated series of case studies drawn from the United States, the United Kingdom and Australia. A central purpose is to not only chart what went wrong within the investment houses and why the regulatory systems failed, but also provide policy guidance. The book therefore combines the empirical with the normative. In so doing, it provides a route map to navigate one of the most significant financial and regulatory failures in modern times./a |
| engineering the financial crisis: Regaining Global Stability After the Financial Crisis Sergi, Bruno, Fidanoski, Filip, Ziolo, Magdalena, Naumovski, Vladimir, 2018-04-06 The prosperity and stability of any economic structure is reliant upon a foundation of secure systems that regulate the movement of money across the globe. These structures have become an integral part of contemporary society by reducing monetary risk and increasing financial security. Regaining Global Stability After the Financial Crisis is a critical scholarly publication that examines the after-effects of the economic slowdown and the steps that have been taken to overcome the consequences of the slowdown as well as strategies to reduce its impact on economies and societies. Highlighting a wide range of topics including economic convergence, risk management, and public policy for financial stability, this book is geared toward academicians, practitioners, students, managers, and professionals in the financial sector seeking current research on regaining a sense of safety and security after a time of economic crisis. |
| engineering the financial crisis: The Municipal Financial Crisis Mark Moses, 2022-01-06 City governments are going bankrupt. Even the ones that aren’t are often stuck in financial chaos. It is easy to blame pensions, poor leadership, or a bad economy. But the problems go much deeper. With decades of experience in local government, author Mark Moses showcases the inside world of the city decision-making process that has spawned these crises. It becomes clear: City governments are maxing out their budgets because they are trying to maximize services. This book, likely the most ambitious attempt by someone who has worked in government to radically examine the delivery of municipal services since 'Reinventing Government' was published more than 25 years ago, explores why city governments pursue an open-ended mission and why bailouts and trendy budgeting processes will be, at best, only temporary solutions. Of interest to current and future city council members, regional and state government officials, those covering city government, financial analysts, city management, and individuals and organizations interested in influencing city policy, this book argues that cities won’t thrive until city hall is disrupted. |
| engineering the financial crisis: This Time Is Different Carmen M. Reinhart, Kenneth S. Rogoff, 2011-08-07 An empirical investigation of financial crises during the last 800 years. |
| engineering the financial crisis: The Number That Killed Us Pablo Triana, 2011-11-01 A critical look at the risk measurement tool that has repeatedly hurt the financial world The Number That Killed Us finally tells the greatest story never told: how a mysterious financial risk measurement model has ruled the world for the past two decades and how it has repeatedly, and severely, caused market, economic, and social turmoil. This model was the key factor behind the unleashing of the cataclysmic credit crisis that erupted in 2007 and which the effects are still being felt around the world. The Number That Killed Us is the first and only book to thoroughly explain this hitherto-uncovered phenomenon, making it the key reference for truly understanding why the malaise took place. The very number financial institutions and regulators use to measure risk (Vale at Risk/VaR) has masked it, allowing firms to leverage up their speculative bets to unimaginable levels. VaR sanctioned and allowed the monstrously geared toxic punts that sank Wall Street, and the world, during the latest crisis. We can confidently say that VaR was the culprit. In The Number That Killed Us, derivatives expert Pablo Triana takes you through the development of VaR and shows how its inevitable structural flaws allowed banks to take on even greater risks. The precise role of VaR in igniting the latest crisis is thoroughly covered, including in-depth analysis of how and why regulators, by falling in love with the tool, condemned us to chaos. Uncritically embraced worldwide for way too long, VaR is, in the face of such destruction, just starting to be examined as problematic, and in this book Triana (long an open critic of the tool's role in encouraging mayhem) uncovers exactly why it makes our financial world a more dangerous place. If we care for our safety, we should let VaR go. Contains controversial analysis of the hotly debated risk metric Value at Risk (VaR) and its central role in the credit crisis Denounces the role of regulators and academics in forcing the presence of the inevitably malfunctioning in financeland Describes how bonus-hungry traders can use VaR as an alibi to take on the most reckless of bets Reveals how the most recent financial crisis will simply repeat itself if the problems behind VaR are not unmasked Pablo Triana is also the author of Lecturing Birds on Flying The very risk measurement tool that was intended to contain risk allowed financial firms to blindly take on more. The model that was supposed to save us condemned us to misery. The Number That Killed Us reveals how this has happened and what needs to be done to correct the situation. |
| engineering the financial crisis: The Global Economic Crisis Larry Allen, 2013-06-01 From Greece scrambling to meet Eurozone austerity measures to America’s sluggish job growth, there is every indication that the world has not recovered from the economic implosion of 2008. And for many of us, the details of what led to the recession—and why it has continued—remain murky. Economic historian Larry Allen clears up the subject in The Global Economic Crisis, offering an insightful and nonpartisan chronology of events and their consequences. Illuminating the interlocked economic processes that lay beneath the crisis, he analyzes the changing nature of the global financial system, central bank policies, housing bubbles, deregulation, sovereign debt crises, and more. Allen begins the timeline with the economic crisis in Japan in the late 1990s, asking whether Japan’s experience could be an indicator of the outcome of the recession and what it can teach us about managing a sluggish economy. He then takes a comparative look at the economies of Brazil, China, and India. Throughout, he argues that many elements have contributed to the ongoing crisis, including the introduction of the euro, the growth of new financial instruments such as securitization, collateralized debt obligations and credit default swaps, interest rate policies, and the housing boom and subprime mortgage fiasco. Lucid and informative, The Global Economic Crisis provides an impartial explanation to anyone seeking to understand the current state—and future—of the world’s economy. |
| engineering the financial crisis: Financial Whirlpools Karen L. Higgins, 2013-03-26 How do economists reconcile their expertise with their failures to predict and manage the 2008 financial crisis? This book goes a long way toward an answer by using systems theory to reveal the complex interdependence of factors and forces behind the crisis. In her fully integrated view of the economy, how it works, and how the economic crisis burst, Karen Higgins combines human psychology, cultural values, and belief formation with descriptions of the ways banks and markets succeed and fail. In each chapter she introduces themes from financial crisis literature and brings a systems-theory treatment of them. Her methodology and visual presentations both develop the tools of systems theory and apply these tools to the financial crisis. Not just another volume about the crisis, this book challenges the status quo through its unique multidisciplinary approach. - Presents a broad global view of international economic health and international corporate health - Describes how policies, regulations, and trends dating to the 1950s influenced the crisis - Assumes readers possess a general familiarity of economics and finance |
| engineering the financial crisis: The Great Recession Michael S. H. Heng, 2010 Deals with the 2008 financial crisis and the recession. This book takes the real economy as the starting point and situates the downturn within the societal context over the last several decades. |
| engineering the financial crisis: Financial Crises: Types, Causes and Consequences Shen Wei, 2020-10-09 While the world is witnessing a new wave of financial slowdown and great recession due to the coronavirus pandemic, the understanding of financial crises has not been complete. The contributors of this book look into financial crises from economic, legal, political science, social science lens with the aim of understanding the types, causes, consequences and impacts of financial crises in a comprehensive way. More importantly, the authors investigate regulatory responses, regulatory effectiveness, regulatory responses by applying a variety of approaches and methodologies through the study of financial, corporate, business, healthcare, capital market, banking sectors. This is a timely contribution to our understanding of financial crises and preparation for the next financial recession on the horizon. |
| engineering the financial crisis: The Financial Crisis Inquiry Report, Authorized Edition United States. Financial Crisis Inquiry Commission, 2011-01-27 Examines the causes of the financial crisis that began in 2008 and reveals the weaknesses found in financial regulation, excessive borrowing, and breaches in accountability. |
| engineering the financial crisis: Corporate Governance and the Global Financial Crisis William Sun, Jim Stewart, David Pollard, 2011-07-21 Over the last two decades there has been a notable increase in the number of corporate governance codes and principles, as well as a range of improvements in structures and mechanisms. Despite this, corporate governance failed to prevent a widespread default of fiduciary duties of corporate boards and managerial responsibilities in the finance industry, which contributed to the 2007–10 global financial crisis. This book brings together leading scholars from North America, Europe, Asia-Pacific and the Middle East to provide fresh and critical analytical insights on the systemic failures of corporate governance linked to the global financial crisis. Contributors draw from a range of disciplines to demonstrate the severe limitations of the dominant corporate governance framework and its associated market-oriented approach. They provide suggestions on how the governance problems could be tackled to prevent or mitigate any future financial crisis and explore new directions for post-crisis corporate governance research and reforms. |
| engineering the financial crisis: Financial Crises Explanations, Types, and Implications Mr.Stijn Claessens, Mr.Ayhan Kose, 2013-01-30 This paper reviews the literature on financial crises focusing on three specific aspects. First, what are the main factors explaining financial crises? Since many theories on the sources of financial crises highlight the importance of sharp fluctuations in asset and credit markets, the paper briefly reviews theoretical and empirical studies on developments in these markets around financial crises. Second, what are the major types of financial crises? The paper focuses on the main theoretical and empirical explanations of four types of financial crises—currency crises, sudden stops, debt crises, and banking crises—and presents a survey of the literature that attempts to identify these episodes. Third, what are the real and financial sector implications of crises? The paper briefly reviews the short- and medium-run implications of crises for the real economy and financial sector. It concludes with a summary of the main lessons from the literature and future research directions. |
| engineering the financial crisis: Japan's Financial Crisis Jennifer Amyx, 2013-10-31 At the beginning of the 1990s, a massive speculative asset bubble burst in Japan, leaving the nation's banks with an enormous burden of nonperforming loans. Banking crises have become increasingly common across the globe, but what was distinctive about the Japanese case was the unusually long delay before the government intervened to aggressively address the bad debt problem. The postponed response by Japanese authorities to the nation's banking crisis has had enormous political and economic consequences for Japan as well as for the rest of the world. This book helps us understand the nature of the Japanese government's response while also providing important insights into why Japan seems unable to get its financial system back on track 13 years later. The book focuses on the role of policy networks in Japanese finance, showing with nuance and detail how Japan's Finance Ministry was embedded within the political and financial worlds, how that structure was similar to and different from that of its counterparts in other countries, and how the distinctive nature of Japan's institutional arrangements affected the capacity of the government to manage change. The book focuses in particular on two intervening variables that bring about a functional shift in the Finance Ministry's policy networks: domestic political change under coalition government and a dramatic rise in information requirements for effective regulation. As a result of change in these variables, networks that once enhanced policymaking capacity in Japanese finance became paralyzing networks--with disastrous results. |
| engineering the financial crisis: In the Wake of the Crisis Olivier Blanchard, David Romer, Michael Spence, Joseph E. Stiglitz, 2014-08-29 Prominent economists reconsider the fundamentals of economic policy for a post-crisis world. In 2011, the International Monetary Fund invited prominent economists and economic policymakers to consider the brave new world of the post-crisis global economy. The result is a book that captures the state of macroeconomic thinking at a transformational moment. The crisis and the weak recovery that has followed raise fundamental questions concerning macroeconomics and economic policy. These top economists discuss future directions for monetary policy, fiscal policy, financial regulation, capital-account management, growth strategies, the international monetary system, and the economic models that should underpin thinking about critical policy choices. Contributors Olivier Blanchard, Ricardo Caballero, Charles Collyns, Arminio Fraga, Már Guðmundsson, Sri Mulyani Indrawati, Otmar Issing, Olivier Jeanne, Rakesh Mohan, Maurice Obstfeld, José Antonio Ocampo, Guillermo Ortiz, Y. V. Reddy, Dani Rodrik, David Romer, Paul Romer, Andrew Sheng, Hyun Song Shin, Parthasarathi Shome, Robert Solow, Michael Spence, Joseph Stiglitz, Adair Turner |
| engineering the financial crisis: What Caused the Financial Crisis Jeffrey Friedman, 2011-06-06 The deflation of the subprime mortgage bubble in 2006-7 is widely agreed to have been the immediate cause of the collapse of the financial sector in 2008. Consequently, one might think that uncovering the origins of subprime lending would make the root causes of the crisis obvious. That is essentially where public debate about the causes of the crisis began—and ended—in the month following the bankruptcy of Lehman Brothers and the 502-point fall in the Dow Jones Industrial Average in mid-September 2008. However, the subprime housing bubble is just one piece of the puzzle. Asset bubbles inflate and burst frequently, but severe worldwide recessions are rare. What was different this time? In What Caused the Financial Crisis leading economists and scholars delve into the major causes of the worst financial collapse since the Great Depression and, together, present a comprehensive picture of the factors that led to it. One essay examines the role of government regulation in expanding home ownership through mortgage subsidies for impoverished borrowers, encouraging the subprime housing bubble. Another explores how banks were able to securitize mortgages by manipulating criteria used for bond ratings. How this led to inaccurate risk assessments that could not be covered by sufficient capital reserves mandated under the Basel accords is made clear in a third essay. Other essays identify monetary policy in the United States and Europe, corporate pay structures, credit-default swaps, banks' leverage, and financial deregulation as possible causes of the crisis. With contributions from Richard A. Posner, Vernon L. Smith, Joseph E. Stiglitz, and John B. Taylor, among others, What Caused the Financial Crisis provides a cogent, comprehensive, and credible explanation of why the crisis happened. It will be an essential resource for scholars and students of finance, economics, history, law, political science, and sociology, as well as others interested in the financial crisis and the nature of modern capitalism and regulation. |
| engineering the financial crisis: The End of Theory Richard Bookstaber, 2019-04-02 An in-depth look at how to account for the human complexities at the heart of today’s financial system Our economy may have recovered from the Great Recession—but not our economics. The End of Theory discusses why the human condition and the radical uncertainty of our world renders the standard economic model—and the theory behind it—useless for dealing with financial crises. What model should replace it? None. At least not any version we’ve been using for the past two hundred years. Richard Bookstaber argues for a new approach called agent-based economics, one that takes as a starting point the fact that we are humans, not the optimizing automatons that standard economics assumes we are. Sweeping aside the historic failure of twentieth-century economics, The End of Theory offers a novel perspective and more realistic framework to help prevent today's financial system from blowing up again. |
| engineering the financial crisis: Iceland's Secret Jared Bibler, 2021-10-05 A decade after the investigations, the story can be told at last and in full. The crisis, barely understood inside or outside of Iceland even today, is a cautionary tale for the world: an inside look at the high crimes that inevitably follow Wild West capitalism. |
| engineering the financial crisis: Misunderstanding Financial Crises Gary B. Gorton, 2012-11-02 Before 2007, economists thought that financial crises would never happen again in the United States, that such upheavals were a thing of the past. Gary B. Gorton, a prominent expert on financial crises, argues that economists fundamentally misunderstand what they are, why they occur, and why there were none in the U.S. from 1934 to 2007. Misunderstanding Financial Crises offers a back-to-basics overview of financial crises, and shows that they are not rare, idiosyncratic events caused by a perfect storm of unconnected factors. Instead, Gorton shows how financial crises are, indeed, inherent to our financial system. Economists, Gorton writes, looked from a certain point of view and missed everything that was important: the evolution of capital markets and the banking system, the existence of new financial instruments, and the size of certain money markets like the sale and repurchase market. Comparing the so-called Quiet Period of 1934 to 2007, when there were no systemic crises, to the Panic of 2007-2008, Gorton ties together key issues like bank debt and liquidity, credit booms and manias, moral hazard, and too-big-too-fail--all to illustrate the true causes of financial collapse. He argues that the successful regulation that prevented crises since 1934 did not adequately keep pace with innovation in the financial sector, due in part to the misunderstandings of economists, who assured regulators that all was well. Gorton also looks forward to offer both a better way for economists to think about markets and a description of the regulation necessary to address the future threat of financial disaster. |
| engineering the financial crisis: The Subprime Solution Robert J. Shiller, 2012-09-24 A best-selling economist reveals the origins of the subprime mortgage crisis and puts forward bold measures to resolve it by restructuring the institutional foundations of the financial system in a thoughtful study by the author of Irrational Exuberance. First serial, The Atlantic. |
| engineering the financial crisis: Restoring Financial Stability New York University Stern School of Business, 2009-03-23 An insightful look at how to reform our broken financial system The financial crisis that unfolded in September 2008 transformed the United States and world economies. As each day's headlines brought stories of bank failures and rescues, government policies drawn and redrawn against the backdrop of an historic Presidential election, and solutions that seemed to be discarded almost as soon as they were proposed, a group of thirty-three academics at New York University Stern School of Business began tackling the hard questions behind the headlines. Representing fields of finance, economics, and accounting, these professors-led by Dean Thomas Cooley and Vice Dean Ingo Walter-shaped eighteen independent policy papers that proposed market-focused solutions to the problems within a common framework. In December, with great urgency, they sent hand-bound copies to Washington. Restoring Financial Stability is the culmination of their work. Proposes bold, yet principled approaches-including financial policy alternatives and specific courses of action-to deal with this unprecedented, systemic financial crisis Created by the contributions of various academics from New York University's Stern School of Business Provides important perspectives on both the causes of the global financial crisis as well as proposed solutions to ensure it doesn't happen again Contains detailed evaluations and analyses covering many spectrums of the marketplace Edited by Matthew Richardson and Viral Acharya, this reliable resource brings together the best thinking of finance and economics from the faculty of one of the top universities in world. |
| engineering the financial crisis: Makers and Takers Rana Foroohar, 2017-09-12 Is Wall Street bad for Main Street America? A well-told exploration of why our current economy is leaving too many behind. —The New York Times In looking at the forces that shaped the 2016 presidential election, one thing is clear: much of the population believes that our economic system is rigged to enrich the privileged elites at the expense of hard-working Americans. This is a belief held equally on both sides of political spectrum, and it seems only to be gaining momentum. A key reason, says Financial Times columnist Rana Foroohar, is the fact that Wall Street is no longer supporting Main Street businesses that create the jobs for the middle and working class. She draws on in-depth reporting and interviews at the highest rungs of business and government to show how the “financialization of America”—the phenomenon by which finance and its way of thinking have come to dominate every corner of business—is threatening the American Dream. Now updated with new material explaining how our corrupted financial system propelled Donald Trump to power, Makers and Takers explores the confluence of forces that has led American businesses to favor balance-sheet engineering over the actual kind, greed over growth, and short-term profits over putting people to work. From the cozy relationship between Wall Street and Washington, to a tax code designed to benefit wealthy individuals and corporations, to forty years of bad policy decisions, she shows why so many Americans have lost trust in the system, and why it matters urgently to us all. Through colorful stories of both “Takers,” those stifling job creation while lining their own pockets, and “Makers,” businesses serving the real economy, Foroohar shows how we can reverse these trends for a better path forward. |
| engineering the financial crisis: The Shifts and the Shocks Martin Wolf, 2015-11-24 From the chief economic commentator for the Financial Times—a brilliant tour d’horizon of the new global economy There have been many books that have sought to explain the causes and courses of the financial and economic crisis that began in 2007. The Shifts and the Shocks is not another detailed history of the crisis but is the most persuasive and complete account yet published of what the crisis should teach us about modern economies and economics. Written with all the intellectual command and trenchant judgment that have made Martin Wolf one of the world’s most influential economic commentators, The Shifts and the Shocks matches impressive analysis with no-holds-barred criticism and persuasive prescription for a more stable future. It is a book no one with an interest in global affairs will want to neglect. |
| engineering the financial crisis: The Handbook of the Political Economy of Financial Crises Martin H. Wolfson, Gerald A. Epstein, 2013-02-21 The Great Financial Crisis that began in 2007-2008 reminds us with devastating force that financial instability and crises are endemic to capitalist economies. This Handbook describes the theoretical, institutional, and historical factors that can help us understand the forces that create financial crises. |
| engineering the financial crisis: Handbook on Systemic Risk Jean-Pierre Fouque, Joseph A. Langsam, 2013-05-23 The Handbook on Systemic Risk, written by experts in the field, provides researchers with an introduction to the multifaceted aspects of systemic risks facing the global financial markets. The Handbook explores the multidisciplinary approaches to analyzing this risk, the data requirements for further research, and the recommendations being made to avert financial crisis. The Handbook is designed to encourage new researchers to investigate a topic with immense societal implications as well as to provide, for those already actively involved within their own academic discipline, an introduction to the research being undertaken in other disciplines. Each chapter in the Handbook will provide researchers with a superior introduction to the field and with references to more advanced research articles. It is the hope of the editors that this Handbook will stimulate greater interdisciplinary academic research on the critically important topic of systemic risk in the global financial markets. |
| engineering the financial crisis: Fragile by Design Charles W. Calomiris, Stephen Haber, 2015-08-04 Why stable banking systems are so rare Why are banking systems unstable in so many countries—but not in others? The United States has had twelve systemic banking crises since 1840, while Canada has had none. The banking systems of Mexico and Brazil have not only been crisis prone but have provided miniscule amounts of credit to business enterprises and households. Analyzing the political and banking history of the United Kingdom, the United States, Canada, Mexico, and Brazil through several centuries, Fragile by Design demonstrates that chronic banking crises and scarce credit are not accidents. Calomiris and Haber combine political history and economics to examine how coalitions of politicians, bankers, and other interest groups form, why they endure, and how they generate policies that determine who gets to be a banker, who has access to credit, and who pays for bank bailouts and rescues. Fragile by Design is a revealing exploration of the ways that politics inevitably intrudes into bank regulation. |
Engineering the Financial Crisis - De Gruyter
Engineering the financial crisis : systemic risk and the failure of regulation / Jeffrey Friedman and Wladimir Kraus. — 1st ed. p. cm. ISBN 978-0-8122-4357-4 (hardcover : alk. paper) Includes …
The crisis and financial engineering - SAGE Journals
In this article we review the financial market development which led to the 2007–2009 financial crisis. We argue that the crisis was not because of derivatives or financial engineering …
Financial Engineering and Deregulation - Saint Peter's University
This paper highlights the two major factors that led to the financial crisis of 2008. First one being financial engineering, as observed at least in the last two decades, financial engineering has …
Banque Du Liban’s Financial Engineering: Background, …
financial engineering scheme were not limited to financial ones; it also resulted in important social gains. The Lebanese society is the ultimate winner: it will benefit from more financial inclusion, …
Financial Engineering By - SSRN
What are the various issues that are related to the management of financial crisis by means of financial engineering? How can risk be managed by financial engineering during financial crisis?
Engineering Financial Safety: A System-Theoretic Case Study …
This thesis uses a promising new engineering-based accident analysis methodology, CAST (Casual Analysis using STAMP, or Systems Theoretic Accident Models and Processes) to …
Understanding the 2019-2020 Banking and Financial Crisis in …
This study seeks to explore the effects ofthe financial engineering policy on the BdL balance sheet and the commercial banking system, whetherthe financial engineering policy met its stated …
Financial Engineering and The Financial Crisis Paul Embrechts
crisis: • Local politics versus global banks • Too big to fail versus too big to save • Complexity (in various dimensions) and a reigning opaqueness on a massive scale • The “Heads, the bank …
FINANCIAL ENGINEERING AND FINANCIAL - The Law Brigade …
Financial engineering product flaws can be considered one of the major causes of the global financial crisis for a variety of reasons. These products/transactions tend to have two sides. …
The Financial Crisis of 2008.IC - MIT Sloan
Understanding what, how, and why the crisis happened was a critical part of the process to stabilize the financial system in the short term and soften the blow of the next financial crisis. …
Engineering Financial Stability - NBIZ Mag
The severity of the global financial crisis that we have seen over the last two years has to do with a fundamental source of instability in the banking system, one that we can and must design …
Financial Crises: Causes, Consequences, and Policy Responses …
During the crisis, markets around the world experienced colossal disruptions in asset and credit markets, massive erosions of wealth, and unprecedented numbers of bankruptcies.
Engineering Financial Safety: A System-Theoretic Case Study …
a promising new engineering-based accident analysis methodology, CAST (Casual Analysis using STAMP, or Systems Theoretic Accident Models and Processes) to understand an aspect of …
Financial engineering and the productivity crisis
Researchers observing a link between the growth of financialization and falling productivity in major economies highlight two causes. A first focuses on the growing importance of agency …
LESSONS FROM THE FINANCIAL CRISIS - Wiley Online Library
The Robert W. Kolb Series in Finance series provides a comprehensive view of the field of finance in all of its variety and complexity. The series is projected to include approximately 65 …
Lessons from the global financial crisis - fmg.ac.uk
The crisis is a crisis of a specific manifestation of financial capitalism – a largely self- regulating version of the transactions-oriented model of financial intermediation (TOM) over the …
UNIT 14 FINANCIAL ENGINEERING Financial Engineering
financial engineering is the process through which finance managers or intermediary institutions in financial markets add value to existing plain vanilla products that satisfy the users need. John …
FINANCIAL ENGINEERING: BACK TO THE FUTURE - iipseries.org
To identify and analyze emerging trends in financial engineering, such as sustainable finance, cyber security, algorithmic trading, and the rise of digital assets and decentralized finance …
MIRACULOUS FINANCIAL ENGINEERING OR TOXIC FINANCE?
Most economists and financial analysts identify amongst the main causes of the current global financial crisis, the U.S. Federal Reserve’s low interest rates policy (Fed funds) of the latest...
Machine Learning Based Classification Models for Financial …
financial data. The financial crisis happens not only because of bankruptcy and also due to the degrading of debt ratings of credit-related properties. Though default approaches have been …
Engineering the Financial Crisis - De Gruyter
Engineering the financial crisis : systemic risk and the failure of regulation / Jeffrey Friedman and Wladimir Kraus. — 1st ed. p. cm. ISBN 978-0-8122-4357-4 (hardcover : alk. paper) Includes …
The crisis and financial engineering - SAGE Journals
In this article we review the financial market development which led to the 2007–2009 financial crisis. We argue that the crisis was not because of derivatives or financial engineering …
Financial Engineering and Deregulation - Saint Peter's …
This paper highlights the two major factors that led to the financial crisis of 2008. First one being financial engineering, as observed at least in the last two decades, financial engineering has …
Banque Du Liban’s Financial Engineering: Background, …
financial engineering scheme were not limited to financial ones; it also resulted in important social gains. The Lebanese society is the ultimate winner: it will benefit from more financial inclusion, …
Financial Engineering By - SSRN
What are the various issues that are related to the management of financial crisis by means of financial engineering? How can risk be managed by financial engineering during financial crisis?
Engineering Financial Safety: A System-Theoretic Case …
This thesis uses a promising new engineering-based accident analysis methodology, CAST (Casual Analysis using STAMP, or Systems Theoretic Accident Models and Processes) to …
Understanding the 2019-2020 Banking and Financial Crisis in …
This study seeks to explore the effects ofthe financial engineering policy on the BdL balance sheet and the commercial banking system, whetherthe financial engineering policy met its stated …
Financial Engineering and The Financial Crisis Paul Embrechts
crisis: • Local politics versus global banks • Too big to fail versus too big to save • Complexity (in various dimensions) and a reigning opaqueness on a massive scale • The “Heads, the bank …
FINANCIAL ENGINEERING AND FINANCIAL - The Law …
Financial engineering product flaws can be considered one of the major causes of the global financial crisis for a variety of reasons. These products/transactions tend to have two sides. …
The Financial Crisis of 2008.IC - MIT Sloan
Understanding what, how, and why the crisis happened was a critical part of the process to stabilize the financial system in the short term and soften the blow of the next financial crisis. …
Engineering Financial Stability - NBIZ Mag
The severity of the global financial crisis that we have seen over the last two years has to do with a fundamental source of instability in the banking system, one that we can and must design …
Financial Crises: Causes, Consequences, and Policy …
During the crisis, markets around the world experienced colossal disruptions in asset and credit markets, massive erosions of wealth, and unprecedented numbers of bankruptcies.
Engineering Financial Safety: A System-Theoretic Case …
a promising new engineering-based accident analysis methodology, CAST (Casual Analysis using STAMP, or Systems Theoretic Accident Models and Processes) to understand an aspect of …
Financial engineering and the productivity crisis
Researchers observing a link between the growth of financialization and falling productivity in major economies highlight two causes. A first focuses on the growing importance of agency …
LESSONS FROM THE FINANCIAL CRISIS - Wiley Online …
The Robert W. Kolb Series in Finance series provides a comprehensive view of the field of finance in all of its variety and complexity. The series is projected to include approximately 65 volumes …
Lessons from the global financial crisis - fmg.ac.uk
The crisis is a crisis of a specific manifestation of financial capitalism – a largely self- regulating version of the transactions-oriented model of financial intermediation (TOM) over the …
UNIT 14 FINANCIAL ENGINEERING Financial Engineering
financial engineering is the process through which finance managers or intermediary institutions in financial markets add value to existing plain vanilla products that satisfy the users need. John …
FINANCIAL ENGINEERING: BACK TO THE FUTURE
To identify and analyze emerging trends in financial engineering, such as sustainable finance, cyber security, algorithmic trading, and the rise of digital assets and decentralized finance …
MIRACULOUS FINANCIAL ENGINEERING OR TOXIC …
Most economists and financial analysts identify amongst the main causes of the current global financial crisis, the U.S. Federal Reserve’s low interest rates policy (Fed funds) of the latest...
Machine Learning Based Classification Models for Financial …
financial data. The financial crisis happens not only because of bankruptcy and also due to the degrading of debt ratings of credit-related properties. Though default approaches have been …
