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As systemic risk grew, why didn't the pricing of risk increase?
Another danger is the pricing of risk by regulation, not markets.
Under the current Basel regulatory framework, the discount is determined by looking at market pricing of risk.
But it would also undermine the efficient pricing of risk by providing insurance, after the event, for risky behaviour.
It raised concerns about the adequacy of China's regulatory controls, the quality of underwriting and the pricing of risk.
If so, independent pricing of risk, which is what derivatives are meant to be about, would be the real casualty.
Similar(43)
And all across the credit-card industry, the assessment and pricing of risks has been getting more and more refined, thanks largely to advances in technology and data processing.
The rising yields "largely reflect a one-time re-pricing of risk," it said.
"The bankers knew that they were involved in an under-pricing of risk and that at some point a correction would be made," he said.
Still, a full-blown rout in emerging markets is unlikely (though not impossible): some of the re-pricing of risk has already happened amid periodic outflows from emerging markets.
None of what economists call "moral hazard" (paying the price of risk and failure) for people clearly bent on doing good.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com