A healthy financial system encourages the efficient allocation of capital and risk. The collapse of the house price … stochastic optimal control (SOC)/dynamic risk management is a much more effective approach to determine the optimal degree of … leverage, the optimum and excessive risk and the probability of a debt crisis. The theoretically founded early warning signals …

function on too thin layer of capital - high leverage - owing to a misreading of the degree of risk embodied in ever more … is upon capital requirements or debt ratios. The “Quants” ignored systemic risk and just focused upon risk transfer in … following questions: what is an optimal leverage or capital requirement that balances the expected growth against risk? What are …