Last Friday, the Institute staged the first of its new Swiss Finance Industry Seminars with a presentation by
Professor Shin's views on the credit crisis have been published recently in the Washington Post and he had just spent the week participating at a conference held at Study Centre Gerzensee, near
Professor Shin focuses on three 'puzzles' associated with the crisis. Namely, Why the crisis apparently affects some markets but not others? How a financial problem ostensibly limited to a mere portion of the home mortgage market could come to assume such global financial significance? And finally, How is it that subprime credit risk came to be so concentrated among such sophisticated financial players as the major banks?
He points the finger at excessive leverage and the problems that can arise when financial intermediaries significantly raise leverage during booms and then attempt to lower their leverage during downturns.
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