Chile on the pros and cons of connectivity
Greater connectivity helps lower the probability of contagion, but it also increases its spread when problems occur, new research from the Central Bank of Chile posits.
The analysis shows that the expansion of credit derivative activity worked to curtail some of the risk-sharing benefits offered by such innovation, leaving open the scope for a much more virulent crisis. The research also finds that illiquid markets for key financial assets compound the problem, amplifying both the likelihood and
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