Not stressed enough

Turmoil in the US subprime mortgage market has seen mass downgrades, falling prices and a drying up of liquidity in the secondary market. Did banks' stress tests prepare them adequately? Clive Davidson investigates


The market troubles arising from the US subprime mortgage market have caught many investors and dealers on the hop. Delinquencies have far exceeded historical precedent, the rating agencies have downgraded hundreds of securities backed by subprime loans and prices in the secondary market have plummeted amid a drying-up of liquidity. Spooked dealers have refused to extend credit to virtually any structured credit investor, while hedge funds, facing margin calls on loss-making credit exposures

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