Skip to main content
Article thumbnail
Location of Repository

Financial Engineering and Engineering of Financial Regulation

By Yener Coskun

Abstract

As observed at least in last two decades, financial engineering has not only changed the way of doing business in finance world, but also has changed daily life of average citizens in the leading economies. Structured products named as weapons of mass destruction in some post-crisis comments. But it is fair to say that few people could understand the nature and risks of these instruments before the crisis. By using literature review and case study analysis, the author analyses how financial regulation and supervision have failed to understand/manage the financial engineering products during/before the global financial crisis. In this context, we discuss the measures to enhance good regulatory governance in engineered products. We conclude however engineered products have important benefits to the global economy, regulatory/supervisory structure should be improved for better firm/system wide risk management. Secondly, there are four components to improve prudential regulatory/supervisory framework of structured products. Those are, timely/effectively action to the balance sheet problems, to increase the effectiveness of the risk management, to improve independence and quality of prudential regulation/supervision and to increase accountability of supervisors.Financial engineering, structured finance, financial crisis, risk management, regulation

OAI identifier:

Suggested articles

Citations

  1. 2011.The Limitations of Transparency Policy in OTC Markets and Derivatives Trading.
  2. (2002). Crisis Prevention and Crisis Management: The Role of Regulatory Governance, IMF Working Paper,
  3. (2006). Finance and the Fourth Dimension. New Left Review (May-June):
  4. (2003). Financial Crises: Nine Lessons From East Asia, East Asian Bureau of Economic Research, Finance Working Papers No:482,
  5. (2001). Financial Policies and the Prevention Of Financial Crises in Emerging Market Countries,
  6. (2010). in, The Future of Money,
  7. (2008). Miraculous Financial Engineering or Toxic Finance? The genesis of the U.S. subprime mortgage loans crisis and its consequences on the global financial markets and real economy. Working Paper.
  8. (2002). of Delaware Coll. of Bus. and Econ. Ctr. for Corp. Governance Working Paper No.
  9. (2007). Self Discipline in Financial Institutions.
  10. (2010). Structured Finance and Global Financial Crisis.
  11. (2000). The Promise and Limits of Financial Engineering in Emerging Markets.
  12. (2008). Understanding the Subprime Mortgage Crisis. December 5. Available at:

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.