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How important are hedge funds in a crisis?

Reint Gropp ()

No 23, SAFE Policy Letters from Leibniz Institute for Financial Research SAFE

Abstract: Before the 2007-09 crisis, standard risk measurement methods substantially underestimated the threat to the financial system. One reason was that these methods didn't account for how closely commercial banks, investment banks, hedge funds, and insurance companies were linked. As financial conditions worsened in one type of institution, the effects spread to others. A new method that more accurately accounts for these spillover effects suggests that hedge funds may have been central in generating systemic risk during the crisis.

Keywords: systemic risk analysis; statistical risk measurement; spillover effects (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-ban and nep-rmg
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