Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
The 2008 crises systemic risk or not? If yes then why. If not then why?
Note: Make a Report on in It Breifiefly
Expert Solution
Step 1
The probability that an event at the firm level will cause serious instability or the collapse of a whole sector or economy is known as systemic risk. The financial crisis of 2008 was exacerbated by systemic risk. "Too large to fail" refers to companies that are considered a systemic risk.
These organizations are enormous in comparison to their industries or contribute significantly to the overall economy. A corporation with a lot of interconnections can be a source of systemic risk. Systemic risk is not the same as systematic risk; the latter refers to the entire financial system.
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