The collapse of Lehman Brothers in September 2008 caused significant panic in the financial markets. Hedge fund investors learnt an important lesson related to the risks of their money being tied up in a bankrupt entity due to ‘rehypothecation’ risk, sparking billions of US dollars of redemptions from the remaining two broker-dealers, Morgan Stanley and Goldman Sachs. While massive injections of public and private sector funds shored up the financial system, the market upheaval resulted in...
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