The Causes Of Systemic Risk – And Ways To Prevent Them

While the full facets of systemic risk are still unclear, Allen pointed to six things that lead to it: banking panics; banking crises due to falling asset prices; contagion; financial architecture; foreign exchange mismatches in the banking system and behavioral effects from ‘Knightian uncertainty’ — or uncharted waters such as the recent referendum on the ‘Brexit’.

The Causes Of Systemic Risk – And Ways To Prevent Them by Knowledge@Wharton As the U.K.’s vote to leave the European Union shows, the act of one nation could have widespread implications around the world. Similarly, the U.S. housing market meltdown of 2007 to 2009 led to a global financial crisis the effects of which are…

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