Factors
Factors that are found to support systemic risks are:
- Economic implications of models are not well understood. Though each individual model may be made accurate, the facts that (1) all models across the board use the same theoretical basis, and (2) the relationship between financial markets and the economy is not known lead to aggravation of systemic risks.
- Liquidity risks are not accounted for in pricing models used in trading on the financial markets. Since all models are not geared towards this scenario, all participants in an illiquid market using such models will face systemic risks.
Read more about this topic: Systemic Risk
Famous quotes containing the word factors:
“The goal of every culture is to decay through over-civilization; the factors of decadence,—luxury, scepticism, weariness and superstition,—are constant. The civilization of one epoch becomes the manure of the next.”
—Cyril Connolly (1903–1974)
“The economic dependence of woman and her apparently indestructible illusion that marriage will release her from loneliness and work and worry are potent factors in immunizing her from common sense in dealing with men at work.”
—Mary Barnett Gilson (1877–?)
“I always knew I wanted to be somebody. I think that’s where it begins. People decide, “I want to be somebody. I want to make a contribution. I want to leave my mark here.” Then different factors contribute to how you will do that.”
—Faith Ringgold (b. 1934)