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:
“Language makes it possible for a child to incorporate his parents’ verbal prohibitions, to make them part of himself....We don’t speak of a conscience yet in the child who is just acquiring language, but we can see very clearly how language plays an indispensable role in the formation of conscience. In fact, the moral achievement of man, the whole complex of factors that go into the organization of conscience is very largely based upon language.”
—Selma H. Fraiberg (20th century)
“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–?)
“Girls tend to attribute their failures to factors such as lack of ability, while boys tend to attribute failure to specific factors, including teachers’ attitudes. Moreover, girls avoid situations in which failure is likely, whereas boys approach such situations as a challenge, indicating that failure differentially affects self-esteem.”
—Michael Lewis (late–20th-century)