Monday, June 24, 2013

Causes and Cures for Financial Contagion

Author: David Schwartz J.D. CPA
Although it is intuitively clear that interconnectedness has some effect on the transmission of shocks, it is less clear whether and how it significantly increases the likelihood and magnitude of losses compared to a financial system that is not interconnected.

The Office of Financial Research, a government study group created by the Dodd-Frank Act, has released a study of factors that contribute to financial contagion. The paper, entitled “How Likely is Contagion in Financial Networks?" studies the interconnections between financial institutions and examines the conditions under which these interconnections increase and amplify financial shocks.
Comments (0)
Number of views (8097)
RSS
123