58 Pages Posted: 21 Aug 2008 Last revised: 14 Nov 2010
Date Written: February 25, 2010
As the financial crisis has tragically illustrated, the complexities of modern financial markets and investment securities can trigger systemic market failures. Addressing these complexities, this article maintains, is perhaps the greatest financial-market challenge of the future. The article first examines and explains the nature of these complexities. It then analyzes the regulatory and other steps that should be considered to reduce the potential for failure. Because complex financial markets resemble complex engineering systems, and failures in those markets have characteristics of failures in those systems, the article's analysis draws on chaos theory and other approaches used to analyze complex engineering systems.
Keywords: financial markets, regulation
Suggested Citation: Suggested Citation
Schwarcz, Steven L., Regulating Complexity in Financial Markets (February 25, 2010). Washington University Law Review, Vol. 87, No. 2, p. 211, 2009; Duke Law School Public Law & Legal Theory Paper No. 217. Available at SSRN: https://ssrn.com/abstract=1240863
By Dan Awrey