Prof. Jayanth R. Varma’s Financial Markets Blog

A blog on financial markets and their regulation

Theory building in real time

The global turmoil of 2007-08 has been a crisis in slow motion that
has allowed an astonishing amount of theory building and
conceptualization to happen in real time even as the crisis is
evolving. I think that the theorization is much greater both
quantitatively and qualitiatively than what I saw during the Asian
(and LTCM) crisis of 1997-98 which was also a crisis in slow motion. I
have spend the last several days reading and digesting a part of the
huge literature that has emerged. That explains why there have been no
posts on my blog for a long time now. The sense that I get is that, at
a deeper theoretical level, what has happened is not quite so puzzling
though financial market participants find the crisis inexplicable.

I will not attempt to summarize all the excellent work that I have
been reading – they all deserve to be read in full. I shall just
provide the links:

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