The ultimate stress-test: modelling the next liquidity crisis

So far, 2003 has been relatively uneventful – even dull. No Long-Term Capital Management (LTCM), no Asian markets crisis, no Russian bond default. On balance, it’s been the kind of year that has been kind to long-term bond and equity investors. But there’s nothing as inevitable as the next crisis. And the next crisis could be a major derivatives dealer pulling out of the business.

It could be a voluntary exit: an executive committee deciding that the rewards of dealing are not commensurate w

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