Financial markets operate efficiently only when participants
can commit to transactions with reasonable confidence that the
risk of nonpayment can be rationally judged and compensated
for. Fear, whether irrational or otherwise, grips participants
and they unthinkingly disengage from risky assets in favor of
those providing safety and liquidity. The subtle distinctions that
investors make, so critical to the effective operation of financial
markets, are abandoned. Assets, good and bad, are dumped in-
discriminately in circumstances of high uncertainty and fear
that are not conducive to planning and investment.
Alan Greenspan (1998, 2)
History teaches that in the financial markets there will come a
day unlike any other day. The leverage that once multiplied
income will now devastate principal.
Martin Mayer (1999, 2)
Risk, as an act of God, a matter of poor judgment, or as the outcome of reckless behavior, has always been a factor to reckon with in everyday life and in the business community. Corporations, small