Current Financial Crisis and Inadequate Uncertainty Processing: A Comment
نویسندگان
چکیده
The current financial crisis: a brief reminder. As is well known, one of the main causes of the 2008 financial crisis is the fact that banks underestimated the risk of investing in high-risk mortgages. According to the news reports, this underestimation was caused by the banks “mixing” mortgages into complex financial instruments, which somehow lowered the estimated risks. The mixing means, crudely speaking, that a bank made several financial instruments each containing a small portion of each original mortgage. It is very clear that the mixing itself does not change the overall risk, since at the end, we still have the same high-risk mortgages. This means that, strictly speaking, it was not the mixing itself that caused the underestimation of risk but rather the way the risk was estimated for the financial instruments resulting from this mixture.
منابع مشابه
Multiculturalism and Compassion: Responding to Mental Health Needs Among Refugees and Asylum Seekers; Comment on “A Crisis of Humanitarianism: Refugees at the Gates of Europe”
As Fotaki (2019) argues, the current political climate in Europe is threatening principles of humanitarianism, particularly among refugees and asylum seekers. This commentary builds on that argument, with a spotlight on mental health and culturally relevant service design. By addressing some of the barriers faced by refugees and asylum seekers in accessing mental health...
متن کاملFinancial Stability in Islamic Banking System the Capacity to React to Current World Wide Crisis
This paper investigates the financial stability, measured by z-score technique in Islamic banking system of 20 countries from 2000 to 2010. We compare the stability of Islamic banks to the commercial banks, before and after the financial crisis. The empirical results from panel estimation show that: a) the large Islamic banks are more stable than the large commercial banks and furthermo...
متن کاملThe Effect of the Economic Uncertainty Index on the Stability of the Health of the Financial System
Background & Aims: Uncertainty is a state in which the knowledge of a person or persons is limited and full knowledge of the state or result that has been achieved or is not possible. Macroeconomic uncertainties create an uncertain environment for investors and make it impossible for investors to make decisions about future investments more efficiently and with more confidence, and they may suf...
متن کاملPolitical Uncertainty, Financial Crisis, and Market Volatility
This paper examines the impact of political uncertainty on financial crises using a panel of twenty-two emerging markets. By examining political election cycles, we find that eight out of nine of the financial crises happened during the periods of political election and transition. Using a combination of probit and switching regression analysis, we find that there is a significant relationship ...
متن کاملEnhancing Efficiency of Neural Network Model in Prediction of Firms Financial Crisis Using Input Space Dimension Reduction Techniques
The main focus in this study is on data pre-processing, reduction in number of inputs or input space size reduction the purpose of which is the justified generalization of data set in smaller dimensions without losing the most significant data. In case the input space is large, the most important input variables can be identified from which insignificant variables are eliminated, or a variable ...
متن کامل