|
Financial Fragility
Financial fragility is the vulnerability of a financial system to a financial crisis. Franklin Allen and Douglas Gale define financial fragility as the degree to which "...small shocks have disproportionately large effects." Roger Lagunoff and Stacey Schreft write, "In macroeconomics, the term "financial fragility" is used...to refer to a financial system's susceptibility to large-scale financial crises caused by small, routine economic shocks." Sources of financial fragility Why does the financial system exhibit fragility in the first place? Why do banks choose to take on a capital structure that makes them vulnerable to financial crises? There are two views of financial fragility which correspond to two views on the origins of financial crises. According to the fundamental equilibrium or business cycle view, financial crises arise from the poor fundamentals of the economy, which make it vulnerable during a time of duress such as a recession. According to the self-fulfilling or sun ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Financial Crisis
A financial crisis is any of a broad variety of situations in which some financial assets suddenly lose a large part of their nominal value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and many recessions coincided with these panics. Other situations that are often called financial crises include stock market crashes and the bursting of other financial bubbles, currency crises, and sovereign defaults. Financial crises directly result in a loss of paper wealth but do not necessarily result in significant changes in the real economy (e.g. the crisis resulting from the famous tulip mania bubble in the 17th century). Many economists have offered theories about how financial crises develop and how they could be prevented. There is no consensus, however, and financial crises continue to occur from time to time. Types Banking crisis When a bank suffers a sudden rush of withdrawals by depositors, this is called a ''bank run''. S ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Insurance
Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss. An entity which provides insurance is known as an insurer, insurance company, insurance carrier, or underwriter. A person or entity who buys insurance is known as a policyholder, while a person or entity covered under the policy is called an insured. The insurance transaction involves the policyholder assuming a guaranteed, known, and relatively small loss in the form of a payment to the insurer (a premium) in exchange for the insurer's promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms. Furthermore, it usually involves something in which the insured has an insurable interest established by ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Financial Regulation
Financial regulation is a form of regulation or supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the stability and integrity of the financial system. This may be handled by either a government or non-government organization. Financial regulation has also influenced the structure of banking sectors by increasing the variety of financial products available. Financial regulation forms one of three legal categories which constitutes the content of financial law, the other two being market practices and case law. History In the early modern period, the Dutch were the pioneers in financial regulation. The first recorded ban (regulation) on short selling was enacted by the Dutch authorities as early as 1610. Aims of regulation The objectives of financial regulators are usually: * market confidence – to maintain confidence in the financial system * financial stability – contributing to the protection an ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Institutions
Institutions are humanly devised structures of rules and norms that shape and constrain individual behavior. All definitions of institutions generally entail that there is a level of persistence and continuity. Laws, rules, social conventions and norms are all examples of institutions. Institutions vary in their level of formality and informality. Institutions are a principal object of study in social sciences such as political science, anthropology, economics, and sociology (the latter described by Émile Durkheim as the "science of institutions, their genesis and their functioning"). Primary or meta-institutions are institutions such as the family or money that are broad enough to encompass sets of related institutions. Institutions are also a central concern for law, the formal mechanism for political rule-making and enforcement. Historians study and document the founding, growth, decay and development of institutions as part of political, economic and cultural history ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Pegged Exchange Rate
A fixed exchange rate, often called a pegged exchange rate, is a type of exchange rate regime in which a currency's value is fixed or pegged by a monetary authority against the value of another currency, a basket of other currencies, or another measure of value, such as gold. There are benefits and risks to using a fixed exchange rate system. A fixed exchange rate is typically used to stabilize the exchange rate of a currency by directly fixing its value in a predetermined ratio to a different, more stable, or more internationally prevalent currency (or currencies) to which the currency is pegged. In doing so, the exchange rate between the currency and its peg does not change based on market conditions, unlike in a floating (flexible) exchange regime. This makes trade and investments between the two currency areas easier and more predictable and is especially useful for small economies that borrow primarily in foreign currency and in which external trade forms a large part of the ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Ricardo Hausmann
Ricardo Hausmann (born 1956) is the former Director of the Center for International Development currently leading the Center for International Development’s Growth Lab and is a Professor of the Practice of Economic Development at the John F. Kennedy School of Government at Harvard University. He is also a former Venezuelan Minister of Planning and former Head of the (1992–1993). He co-introduced several regularly used concepts in economics including original sin, growth diagnostics, self-discovery, dark matter, the product space, and economic complexity. Ricardo is the father of theatre director and producer Michel Hausmann, art historian Carolina Hausmann and comedian Joanna Hausmann. Esrly life and Career Hausmann was born to a Jewish family in Venezuela. His father was a refugee of the Holocaust who was born in Leipzig, Germany and was orphaned as a teenager. His mother was from Belgium. He explained arned a bachelor's degree in Engineering and Applied Physics (197 ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Barry Eichengreen
Barry Julian Eichengreen (born 1952) is an American economist and economic historian who holds the title of George C. Pardee and Helen N. Pardee Professor of Economics and Political Science at the University of California, Berkeley, where he has taught since 1987. Eichengreen currently serves as a research associate at the National Bureau of Economic Research and as a Research Fellow at the Centre for Economic Policy Research. Eichengreen's mother was Lucille Eichengreen, a Holocaust survivor and author. Career Eichengreen has done research and published widely on the history and current operation of the international monetary and financial system. He received his A.B. from UC Santa Cruz in 1974. an M.A. in economics, an M.Phil. in economics, an M.A. in history, and a Ph.D. in economics from Yale University in New Haven, Connecticut. He was a senior policy advisor to the International Monetary Fund in 1997 and 1998, although he has since been critical of the IMF. In 199 ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Leverage (finance)
In finance, leverage (or gearing in the United Kingdom and Australia) is any technique involving borrowing funds to buy things, hoping that future profits will be many times more than the cost of borrowing. This technique is named after a lever in physics, which amplifies a small input force into a greater output force, because successful leverage amplifies the comparatively small amount of money needed for borrowing into large amounts of profit. However, the technique also involves the high risk of not being able to pay back a large loan. Normally, a lender will set a limit on how much risk it is prepared to take and will set a limit on how much leverage it will permit, and would require the acquired asset to be provided as collateral security for the loan. Leveraging enables gains to be multiplied.Brigham, Eugene F., ''Fundamentals of Financial Management'' (1995). On the other hand, losses are also multiplied, and there is a risk that leveraging will result in a loss if financ ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Emmanuel Farhi
Emmanuel Farhi (8 September 1978 – 23 July 2020) was a French economist and professor of economics at Harvard University. His research focused on macroeconomics, taxation and finance. He was a member of the French Economic Analysis Council to the French Prime Minister from 2010 to 2012. Education The son of an economist of Egyptian Jewish descent, Farhi grew up in Paris where he attended the Lycée Louis-le-Grand. At age 16 he won the Concours général in Physics and continued on to study Mathematics in preparatory class. Ranking 1st on the national entry exam to the elite engineering school École Polytechnique in 1997, he eventually chose to attend another prestigious French graduate school, École Normale Supérieure. He specialized in Mathematics obtaining 2nd place on the Agrégation de Mathematiques (French degree). He was then admitted to the Corps des Mines in 2001. He finished his studies at the Massachusetts Institute of Technology (MIT) and was awarded a Ph.D. i ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Charles Prince
Charles Owen "Chuck" Prince III (born January 13, 1950) is an American corporate executive and lawyer. He is a former chairman and chief executive of Citigroup. He succeeded Sandy Weill as the chief executive of the firm in 2003, and as the chairman of the board in 2006. On November 4, 2007, he retired from both his chairman and chief executive duties due to unexpectedly poor 3rd quarter performance, mainly due to CDO and MBS related losses, while still receiving a $38m pay package. Early life and education Charles Owen Prince III was born in Lynwood, California on 13 January 1950 to Charles Owen Prince II and Mary Doyle. Prince went to the University of Southern California Marshall School of Business for his bachelor's degree, master's degree, and Juris Doctor. He continued his education, going on to receive a Master of Laws degree from Georgetown University Law Center. Career Prince started his career as an attorney with U.S. Steel Corp in 1975. In 1979, he joined Commercial ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Precommitment
In psychology, precommitment refers to a strategy or a method of self-control that an agent may use to restrict the number of choices available to them at a future time. The strategy may also involve the imposition of obstacles or additional costs to certain courses of action in advance. As theorized by the social scientist Jon Elster, agents may precommit themselves when they predict that their preferences will change but wish to ensure that their future actions will align with their current preferences. Precommitment has also been studied as a bargaining strategy in which agents bind themselves to one course of action in order to enhance the credibility of present threats. Some scholars have proposed that collective political agents may also engage in precommitment by adopting constitutions that limit the scope of future legislation. The validity of this application of precommitment theory has been called into question, however. Background In two unrelated articles, both pu ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Credible Threat
A non-credible threat is a term used in game theory and economics to describe a threat in a sequential game that a ''rational'' player would not actually carry out, because it would not be in his best interest to do so. A threat, and its counterparta commitment, are both defined by American economist and Nobel prize winner, T.C. Schelling, who stated that: "A announces that B's behaviour will lead to a response from A. If this response is a reward, then the announcement is a commitment; if this response is a penalty, then the announcement is a threat." While a player might make a threat, it is only deemed credible if it serves the best interest of the player.Heifetz, A., & Yalon-Fortus, J. (2012). Game Theory: Interactive Strategies in Economics and Management. Cambridge University Press. ProQuest Ebook Central In other words, the player would be willing to carry through with the action that is being threatened regardless of the choice of the other player. This is based on the a ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
