Risk Mismanagement - Failure of Model or Regulation

In 2008, the world has experienced a financial crisis. There are many mathematical models for measuring the risk, but now, we know at the very least, they didn’t disclosure risks. The efficient market hypothesis postulates that markets tend towards equilibrium. But the efficient market hypothesis is unrealistic. There is systemic risk in the market in addition to the risks most market participants perceived prior to the crisis. Regulators need to be able to identify risk concentrations early and prevent them from growing so large as to threaten the system. Strengthening the financial system by fixing the flaws that were at the heart of the recent crisis is a fundamental part of our responsibility to society and to future generations.