Could the Fall of Lehman Brothers Unleash 'The Risk Soliton'
Why the complexity and interconnectedness of financial markets could lead to a catastrophe
The author has previously argued that the complexity of modern financial markets, together with the methods used to try to manage risk, could have created a systemically unstable structure; partly through a tangled web of complex credit derivatives.
A 'Soliton' is a non-linear wave, quite unlike the more benign waves that we are used to in every day life.
For technical reasons, the author has previously termed what might conceivably now be triggered in the financial markets, following the collapse of Lehman Brothers, as 'The Risk Soliton' - so could it now be unleashed ?
Afternote: In response to this, Prof. James Galbraith commented: “The metaphor is excellent.”