The Flight from Maturity / Gary B. Gorton, Andrew Metrick, Lei Xie.

Format:

Book

Author/Creator:

Gorton, Gary B.

Contributor:

National Bureau of Economic Research.

Metrick, Andrew.

Xie, Lei.

Series:

Working Paper Series (National Bureau of Economic Research) no. w20027.

NBER working paper series no. w20027

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2014.

Summary:

Why did the failure of Lehman Brothers make the financial crisis dramatically worse? The financial crisis was a process of a build-up of risk during the crisis prior to the Lehman failure. Market participants tried to preserve an option or exit by shortening maturities - the "flight from maturity". With increasingly short maturities, lenders created the possibility of fast exit. The failure of Lehman Brothers was the tipping point of this build-up of systemic fragility. We produce a chronology of the crisis which formalizes the dynamics of the crisis. A crisis is a dynamic process in which "tail risk" is endogenous.

Notes:

Print version record

April 2014.