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... B. What went wrong: blind faith in the efficiency of financial markets................................................................ 1 C. What made it worse: global imbalances and the absent international monetary system.................................... 4 D. What should have been anticipated: t ...
Financial Restructuring
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... 2006 in the UK alone, over 5,000 firms underwent compulsory liquidation, and a further 4,000 were in receivership or administration.1 In practice, far from being an exceptional event, financial distress can be considered an integral part of a well-functioning market. After all, it can and does resul ...
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... or make decisions using cat models and their output. In some cases this could be senior management, Actuaries or Cat modellers themselves. With a general audience such as this the paper goes quickly over a range of issues and does not delve to deep, there are many specific papers on many of the area ...
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... business is more able to suffer losses due to IT decisions. Both the number and the severity of potential IT failures (specifically the ones related to IT operations) are rising over time:  Business transactions are increasingly dependent on IT, so failures in IT are more likely to impact the busin ...
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... a loan. The lending companies mitigated their risk by turning the mortgages into Collateral Debt Obligations (see chapter 3), which were bought up by many investment banks. Banks mitigated the risk to non-portfolio managers, who further spread the risk to investors all over the globe. These investme ...
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... especially as information gathering is one of their key functions. Asymmetric information, externalities in financial markets (Stiglitz & Weiss, 1981) and imperfect competition (for example, as a result of fixed costs) can lead to sub-optimal levels of financing and investment, an inefficient alloca ...
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... chain will fail with zero liquidation value so that lenders suffer full loss on their loans to the chain. Before date  + 1, there is no probability of failure, and firms can borrow at the risk-free rate of zero. But starting from the loan repayable at date  + 1, they must borrow at the higher rate ...
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Systemic risk

In finance, systemic risk is the risk of collapse of an entire financial system or entire market, as opposed to risk associated with any one individual entity, group or component of a system, that can be contained therein without harming the entire system. It can be defined as ""financial system instability, potentially catastrophic, caused or exacerbated by idiosyncratic events or conditions in financial intermediaries"". It refers to the risks imposed by interlinkages and interdependencies in a system or market, where the failure of a single entity or cluster of entities can cause a cascading failure, which could potentially bankrupt or bring down the entire system or market. It is also sometimes erroneously referred to as ""systematic risk"".
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