New IJF now accepts submissions exclusively via the Editorial Scholar portal — a dedicated submission & review system.
Go to Editorial Scholar →
Associated Management Consultants Pvt. Ltd. | COPE Member
Scopus Q2 UGC-CARE |
Indian Journal of Finance logo

Indian Journal of Finance

ISSN: 0973-8711 Frequency: Monthly Peer Review: Double-blind Published since: 2007 Language: English
A publication of AMCPL
amcon.co.in
New Delhi, India
Indexed in: Scopus Q2 UGC-CARE Group II Google Scholar J-Gate NISCAIR Crossref

Original Article

Open Access Original Article

The Inverted Pyramid Model - A Physical Perspective to Understand How Risk is Undermined in Designing Complex Financial Instruments

Shveta Singh1

1 Faculty, Indian Institute of Information Technology-Allahabad, Uttar Pradesh

Volume 3
Issue 8
Pages 3–7
Year 2009
Published: Aug. 1, 2009
Abstract

The recent financial upheavals that rocked the International Financial Systems across the world are evidence of how very sophisticated technical theories and tools often lose out to conventional wisdom a.k.a. common sense. What even some Wall Street stalwarts failed to look into or rather ignored are the rather mundane applications of physical science, pressure and force that act upon an object as you build upon it. It was plain and simple greed on the parts of some which has led to an international financial crisis not seen before. And this time too, it is basic conventional theories and fundamental concepts and sciences that hold the answer to what went wrong. What financial wizards chose to ignore in designing the sophisticated sounding collateral debt obligations was the risk that would then be piling up on the inherent base security acting as the bottom of an inverted pyramid that started shaping up. This paper invokes a model that'll help in analyzing the force in terms of increased systematic and unsystematic risk that started building up not just on the underlying security but indeed on the CDOs and the financial environment surrounding these specialized derivatives.

How to Cite

Shveta Singh (2009). The Inverted Pyramid Model - A Physical Perspective to Understand How Risk is Undermined in Designing Complex Financial Instruments. Indian Journal of Finance, 3(8), 3–7.

Editorial Scholar

Submit your Research to IJF

Submit your Manuscript → Author Guidelines