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A Fuzzy Characterization Of Uncertainty In Financial Crises

Author

Listed:
  • Pazzi, Jorge

    (University Nacional del Sur)

  • Tohmé, Fernando

    (University Nacional del Sur, CONICET)

Abstract

The so-called first and second gene-ration models focus on fundamentals as the main cause of a crisis. During the 1990s many developing economies underwent structural reforms, which lead to an improvement of those fundamentals. Hence, at that time, the stability of the domestic financial systems seemed basically guaranteed. However, this confidence was shattered by the outbreak of the financial crises of the second half of the decade. Some of them were certainly due to weak fundamentals in the affected economies. But other crises seemed to be engendered just because of wrong or misleading perceptions on the part of economic agents. The paper argues that a main source for these misperceptions is the way in which agents hedge their funds, on the basis of their assessment of the inner workings of the financial system. To support this claim, a simple model with a fuzzy measure of the risk of assets is introduced

Suggested Citation

  • Pazzi, Jorge & Tohmé, Fernando, 2005. "A Fuzzy Characterization Of Uncertainty In Financial Crises," Fuzzy Economic Review, International Association for Fuzzy-set Management and Economy (SIGEF), vol. 0(2), pages 61-70, November.
  • Handle: RePEc:fzy:fuzeco:v:x:y:2005:i:2:p:61-70
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    More about this item

    Keywords

    Financial crises; fuzzy measures of uncertainty; hedging; dollarization; systemic risk.;
    All these keywords.

    JEL classification:

    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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