Financial Engineering and Engineering of Financial Regulation

Yener Coskun ()

MPRA Paper from University Library of Munich, Germany

Abstract: As observed at least in last two decades, financial engineering has not only changed the way of doing business in finance world, but also has changed daily life of average citizens in the leading economies. Structured products named as weapons of mass destruction in some post-crisis comments. But it is fair to say that few people could understand the nature and risks of these instruments before the crisis. By using literature review and case study analysis, the author analyses how financial regulation and supervision have failed to understand/manage the financial engineering products during/before the global financial crisis. In this context, we discuss the measures to enhance good regulatory governance in engineered products. We conclude however engineered products have important benefits to the global economy, regulatory/supervisory structure should be improved for better firm/system wide risk management. Secondly, there are four components to improve prudential regulatory/supervisory framework of structured products. Those are, timely/effectively action to the balance sheet problems, to increase the effectiveness of the risk management, to improve independence and quality of prudential regulation/supervision and to increase accountability of supervisors.

Keywords: Financial engineering; structured finance; financial crisis; risk management; regulation (search for similar items in EconPapers)
JEL-codes: G01 G24 G32 G38 (search for similar items in EconPapers)
Date: 2011-10-21
New Economics Papers: this item is included in nep-reg
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Citations: View citations in EconPapers (4)

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