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Structured Finance, Risk Management, and the Recent Financial Crisis

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  • Georges Dionne

Abstract

Structured finance is often mentioned as the main cause of the latest financial crisis. We argue that structured finance per se did not trigger the last financial crisis. The crisis was propagated around the world because of poor risk management such as agency problems in the securitization market, poor rating and pricing standards, rating agency incentives, lack of market transparency, the search for higher yields by top decision makers and the failure of regulators and central banks to understand the implications of the changing environment.

Suggested Citation

  • Georges Dionne, 2009. "Structured Finance, Risk Management, and the Recent Financial Crisis," Cahiers de recherche 0944, CIRPEE.
  • Handle: RePEc:lvl:lacicr:0944
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    File URL: http://www.cirpee.org/fileadmin/documents/Cahiers_2009/CIRPEE09-44.pdf
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    Cited by:

    1. Georges Dionne, 2013. "Risk Management: History, Definition, and Critique," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 16(2), pages 147-166, September.
    2. repec:gam:jrisks:v:5:y:2017:i:4:p:55-:d:115890 is not listed on IDEAS
    3. Georges Dionne & Sara Malekan, 2017. "Optimal Form of Retention for Securitized Loans under Moral Hazard," Risks, MDPI, Open Access Journal, vol. 5(4), pages 1-13, October.

    More about this item

    Keywords

    Structured finance; risk management; financial crisis; collateral debt obligation (CDO); asset back commercial paper (ABCP); rating; pricing; securitization; regulation of financial markets;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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