Financial stability monetary policy and Central Banking: an overview
The financial developments of the last decade had a large impact on the management of risk providing more diversified portfolios to investors. Based on these complex financial contracts investors were able to shift the investment possibilities frontier outward however that movement generated intricate networks. At the same time global financial integration increased significantly facilitating the propagation and expansion of financial shocks. The recent financial crisis is evidence of such networking sensitivity. In February 2007 Freddie Mac announced its intention to reduce its mortgage portfolio risk by ceasing to purchase risky loans and then in April of the same year one of the leading companies in the subprime mortgage market declared bankruptcy.