Concept
2007–2008 financial crisis
Related concepts (172)
Deleveraging
At the micro-economic level, deleveraging refers to the reduction of the leverage ratio, or the percentage of debt in the balance sheet of a single economic entity, such as a household or a firm. It is the opposite of leveraging, which is the practice of borrowing money to acquire assets and multiply gains and losses. At the macro-economic level, deleveraging of an economy refers to the simultaneous reduction of debt levels in multiple sectors, including private sectors and the government sector.
Model risk
In finance, model risk is the risk of loss resulting from using insufficiently accurate models to make decisions, originally and frequently in the context of valuing financial securities. However, model risk is more and more prevalent in activities other than financial securities valuation, such as assigning consumer credit scores, real-time probability prediction of fraudulent credit card transactions, and computing the probability of air flight passenger being a terrorist.
Credit derivative
In finance, a credit derivative refers to any one of "various instruments and techniques designed to separate and then transfer the credit risk" or the risk of an event of default of a corporate or sovereign borrower, transferring it to an entity other than the lender or debtholder. An unfunded credit derivative is one where credit protection is bought and sold between bilateral counterparties without the protection seller having to put up money upfront or at any given time during the life of the deal unless an event of default occurs.
Too big to fail
"Too big to fail" (TBTF) is a theory in banking and finance that asserts that certain corporations, particularly financial institutions, are so large and so interconnected that their failure would be disastrous to the greater economic system, and therefore should be supported by government when they face potential failure. The colloquial term "too big to fail" was popularized by U.S. Congressman Stewart McKinney in a 1984 Congressional hearing, discussing the Federal Deposit Insurance Corporation's intervention with Continental Illinois.
Financial institution
Financial institutions, sometimes called banking institutions, are business entities that provide services as intermediaries for different types of financial monetary transactions. Broadly speaking, there are three major types of financial institutions: Depository institutions – deposit-taking institutions that accept and manage deposits and make loans, including banks, building societies, credit unions, trust companies, and mortgage loan companies; Contractual institutions – insurance companies and pension funds Investment institutions – investment banks, underwriters, and other different types of financial entities managing investments.
Recession
In economics, a recession is a business cycle contraction that occurs when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock, the bursting of an economic bubble, or a large-scale anthropogenic or natural disaster (e.g. a pandemic).
Crédit Agricole
Crédit Agricole Group (kʁedi aɡʁikɔl), sometimes called La banque verte (The green bank) due to its historical ties to farming, is a French international banking group and the world's largest cooperative financial institution. It is France's second largest bank, after BNP Paribas, as well as the third largest in Europe and tenth largest in the world. It consists of a network of Crédit Agricole local banks, the 39 Crédit Agricole regional banks, and a central institute, the Crédit Agricole S.A..
Mario Draghi
Mario Draghi (ˈmaːrjo ˈdraːɡi; born 3 September 1947) is an Italian economist, academic, banker, and civil servant who served as prime minister of Italy from 13 February 2021 to 22 October 2022. Prior to his appointment as prime minister, he served as President of the European Central Bank (ECB) between 2011 and 2019. Draghi was also Chair of the Financial Stability Board between 2009 and 2011, and Governor of the Bank of Italy between 2006 and 2011. After a lengthy career as an academic economist in Italy, Draghi worked for the World Bank in Washington, D.
Northern Rock
Northern Rock, formerly the Northern Rock Building Society, was a British bank. Based at Regent Centre in Newcastle upon Tyne, United Kingdom, Northern Rock was originally a building society. It demutualised and became Northern Rock bank in 1997, when it floated on the London Stock Exchange with the ticker symbol NRK. During the early 2000s the company borrowed substantially to fund mortgages, with the aim of ambitious growth, and also donated large amounts to charitable purposes and communities directly and through sponsorships.
Value at risk
Value at risk (VaR) is a measure of the risk of loss of investment/Capital. It estimates how much a set of investments might lose (with a given probability), given normal market conditions, in a set time period such as a day. VaR is typically used by firms and regulators in the financial industry to gauge the amount of assets needed to cover possible losses. For a given portfolio, time horizon, and probability p, the p VaR can be defined informally as the maximum possible loss during that time after excluding all worse outcomes whose combined probability is at most p.