Risk Management, The Subprime Crisis and Finance-Dominated Capitalism: What Went Wrong? A Systematic Literature Review

Barradas, Ricardo; Lagoa, Sérgio; Leão, Emanuel

http://hdl.handle.net/10400.21/8106

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Authors

Barradas, Ricardo

Lagoa, Sérgio

Leão, Emanuel

Abstract(s)

This chapter is concerned with the implications of both visions of finance for risk management. The mainstream view argues that, as finance grows, risk management becomes more efficient and therefore ensures the diversification and control of risk. In contrast, the financialization approach is sceptical about the finance sector’s capacity to manage risk effectively. We review the literature to assess the role of risk management in the subprime crisis in order to evaluate which of the two aforementioned visions prevails and which is more persuasive. This chapter is concerned with the implications of both visions of finance for risk management.