On the causes of the current financial crisis: risk underassessment and financial system complexity Cover Image

Despre cauzele crizei financiare actuale: subevaluarea riscului şi complexitatea sistemului financiar
On the causes of the current financial crisis: risk underassessment and financial system complexity

Author(s): Iulia Lupu, Alexandra Lavinia Horobet, Dan Gabriel Dumitrescu
Subject(s): Politics / Political Sciences
Published by: Fundaţia »Societatea Civilă« (FSC)
Keywords: Financial crisis; financial markets; financial system; complexity; risk

Summary/Abstract: The paper presents the authors' views on the possible underlying and interconnected causes of the current financial crisis: the underassessment of risk by market participants and the inherent complexity of financial systems. Besides other explanations of the causes behind the recent financial turmoil such as government and central bank policies, financial markets liberalization, investors’ excessive appetite for risk and the use of financial models, one need to recognize the fact that underassessment of risk by market participants and policy makers is a major cause for the current crises, as for previous ones. The underestimation of risk is tightly coupled to the complexity of nowadays financial markets, as a result of an interlinking of securities, structures, and derivatives build around the subprime mortgages.

  • Issue Year: 2010
  • Issue No: 148
  • Page Range: 44-48
  • Page Count: 5
  • Language: Romanian