Have Financial Markets Learned from Past Crises?

Abstract

The author surveys how recent crises—in particular, the LTCM collapse of 1998 and the events of September 11, 2001—have influenced the application and interpretation of risk models by various practitioners within the financial markets. The article highlights notable differences in risk management practices within the fixed income and swaps markets between these two market periods. The conclusion is that, exclusive of certain fundamental differences between the two events (the moral hazard inherent in the LTCM collapse, and the Fed intervention during the fall of 2001), the institutional response to market shocks has evolved over the past three years, although measurement methods remain essentially unchanged.

Citation

TILMAN, L.M. (2002), "Have Financial Markets Learned from Past Crises?", Journal of Risk Finance, Vol. 3 No. 2, pp. 62-63. https://doi.org/10.1108/eb043489