This Article presents a theory for how policymakers should use stress testing as a tool of financial regulation. In finance, a stress test is an exercise gauging how an institution or system will respond to severe, yet plausible, stressed conditions such as stock market crashes, high...

Normal Accident Theory describes the phenomenon by which complex and tightly coupled systems lead inevitably to accidents as a consequence of a system’s design. Some scholars have applied this interpretive lens to describe the inevitability of crises in complex, tightly coupled financial...

This edited collection comprehensively addresses the widespread regulatory challenges uncovered and changes introduced in financial markets following the 2007-2008 crisis, suggesting strategies by which financial institutions can comply with stringent new regulations and adapt to the pressures...

In recent years, the question of how to prevent another crippling re-cession has become a prominent one. The answer provided by the Dodd-Frank Act is stress testing, which examines through economic models how banks would react to a bad turn of economic events, such as negative interest rates....

The most recent global credit mishap of 2008, the worst financial catastrophe of the 21st century, succeeded the Great Depression of the 1930s as the worst event of all times, and used in stress testing under severely adverse scenario analysis. Rather promoting financial stability, the Basel...

The financial sector faces different systemic events. The early recognition of these events is a key step to monitor and track possible financial crises. Three main questions arise related to systemic risk, and they deal with their quantification, their probability of occurrence and the role of...