Cuono Massimo Coletta
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A moral hazard perspective on financial crisis
Francesco Busato , Cuono Massimo Coletta doi: http://dx.doi.org/10.21511/bbs.12(3-1).2017.13Banks and Bank Systems Volume 12, 2017 Issue #3 pp. 298-307
Views: 1329 Downloads: 481 TO CITE АНОТАЦІЯMoral hazard is a typical problem of modern economic system, if we consider its a central role in the events leading up to the (financial) crisis of 2008. Therefore, there is a need to better appreciate its nature and its role, if future reforms are to be well designed in order to prevent further crises, default, bankrupt, down the line. Along this perspective, the paper discusses a moral hazard perspective on recent financial crisis, from Enron bankruptcy, to Lehman case, through AIG, Bearn Stern, Citigroup bail out, commenting, eventually, selected rules contained in the Sarbanes Oxley Act issued by the U.S. Government in 2002. The paper, next, comments on recent crisis of four Italian banks and on the bail in recently introduced for European banks. Eventually, the paper focuses on the so-called “free-rider” problem, discussing pro and cons of selected financial instruments (e.g. credit derivatives), while offering from a technical standpoint with the help of an analytical approach.
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