{ "@context": "https://schema.org", "@type": "DefinedTerm", "@id": "https://wulfkaal.github.io/entities/systemic-risk", "identifier": "kaal:entity:systemic-risk", "name": "Systemic risk", "termCode": "systemic-risk", "inDefinedTermSet": { "@id": "https://wulfkaal.github.io/entities/index.json" }, "author": { "@type": "Person", "name": "Wulf A. Kaal", "identifier": "https://orcid.org/0000-0003-0757-275X" }, "dateModified": "2026-07-29", "canonicalForm": "https://wulfkaal.github.io/entities/systemic-risk.md", "sha256": "e6053de6b1a0f26edb1a4117c24d6266b0f099e68e470d260554feb800c747d6", "additionalProperty": [ { "@type": "PropertyValue", "name": "status", "value": "derived" }, { "@type": "PropertyValue", "name": "claim_count", "value": 85 }, { "@type": "PropertyValue", "name": "work_count", "value": 27 }, { "@type": "PropertyValue", "name": "year_span", "value": [ "2011", "2025" ] }, { "@type": "PropertyValue", "name": "non_current_claims", "value": 0 } ], "subjectOf": [ { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/1806252-001", "identifier": "kaal:claim:1806252-001", "text": "Contrary to critics who blame the Basel Accords, harmonization through Basel II is not what made banks hold similar assets; banks held similar assets because those assets were profitable.", "abstract": "harmonization through Basel II that made banks hold similar assets: banks held similar assets because of the profitability of these assets.", "citation": "Kaal, Hedge Fund Regulation Via Basel III (2011). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1806252", "datePublished": "2011", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [], "source_pdf_sha256": "3343ebfe05a925c3d1a75625c4b351ccff515c50819a48d155804daacf01429d", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/1806252-008", "identifier": "kaal:claim:1806252-008", "text": "If regulators lack the resources to protect against systemic risk, hedge fund regulation could be futile.", "abstract": "If regulators lack the resources to protect against systemic risk, hedge fund regulation could be futile.", "citation": "Kaal, Hedge Fund Regulation Via Basel III (2011). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1806252", "datePublished": "2011", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "regulators are given a systemic risk mandate they lack capacity to execute" ], "source_pdf_sha256": "3343ebfe05a925c3d1a75625c4b351ccff515c50819a48d155804daacf01429d", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/1806252-014", "identifier": "kaal:claim:1806252-014", "text": "Systemic risk and financial market stability are public goods, so individual banks free ride on other banks' hedge fund credit risk management and are not incentivized to adequately monitor or limit their own hedge fund risk exposure.", "abstract": "Systemic risk and financial market stability generate public good and free-rider problems: banks are not incentivized to adequately monitor or limit hedge fund risk exposure because of their reliance on hedge fund credit risk management by other banks.", "citation": "Kaal, Hedge Fund Regulation Via Basel III (2011). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1806252", "datePublished": "2011", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [], "source_pdf_sha256": "3343ebfe05a925c3d1a75625c4b351ccff515c50819a48d155804daacf01429d", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/1806252-015", "identifier": "kaal:claim:1806252-015", "text": "An institution or a country creates externalities when it manages its own hedge fund generated systemic risk without considering how its actions or inactions affect risk in the system as a whole.", "abstract": "An institution or country creates externalities if it manages its own hedge fund-generated systemic risk without considering the impact of its actions or inactions on the risk in the system as a whole.", "citation": "Kaal, Hedge Fund Regulation Via Basel III (2011). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1806252", "datePublished": "2011", "claim_type": "definitional", "confidence": "asserted", "is_failure_mode": false, "scope_conditions": [], "source_pdf_sha256": "3343ebfe05a925c3d1a75625c4b351ccff515c50819a48d155804daacf01429d", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/1806252-016", "identifier": "kaal:claim:1806252-016", "text": "Even if hedge fund investing does have systemic implications, systemic risk is multifaceted enough that addressing it could require more than one regulator in a single jurisdiction, so the SEC alone may be unable to accomplish the task.", "abstract": "Even assuming that systemic implications arise from hedge fund investing, systemic risk is such a multifaceted issue that it could require the involvement of more than one regulator in one jurisdiction.", "citation": "Kaal, Hedge Fund Regulation Via Basel III (2011). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1806252", "datePublished": "2011", "claim_type": "condition", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "systemic risk is difficult to measure and the required information is widely dispersed" ], "source_pdf_sha256": "3343ebfe05a925c3d1a75625c4b351ccff515c50819a48d155804daacf01429d", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/1806252-017", "identifier": "kaal:claim:1806252-017", "text": "The SEC would be better advised to interpret the rulemaking authority it received from Congress than to increase requirements on hedge funds in order to address concerns over potential systemic risk.", "abstract": "Perhaps the SEC would be well advised to interpret the authority it received from Congress rather than to increase the requirements on hedge funds to address concerns over potential systemic risk.", "citation": "Kaal, Hedge Fund Regulation Via Basel III (2011). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1806252", "datePublished": "2011", "claim_type": "normative", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "indicia suggest hedge funds may not pose systemic risk" ], "source_pdf_sha256": "3343ebfe05a925c3d1a75625c4b351ccff515c50819a48d155804daacf01429d", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/1806252-034", "identifier": "kaal:claim:1806252-034", "text": "Without the threat of systemic risk and without a clear delineation of the social externalities that hedge funds cause, the purpose of direct hedge fund regulation is unclear.", "abstract": "Without the threat of systemic risk and without a clear delineation of social externalities caused by hedge funds, the purpose of direct hedge fund regulation is unclear.", "citation": "Kaal, Hedge Fund Regulation Via Basel III (2011). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1806252", "datePublished": "2011", "claim_type": "condition", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "hedge funds have fewer assets and less leverage than banks", "collapses such as Amaranth in 2006 and large redemptions did not cause systemic problems" ], "source_pdf_sha256": "3343ebfe05a925c3d1a75625c4b351ccff515c50819a48d155804daacf01429d", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/1806252-035", "identifier": "kaal:claim:1806252-035", "text": "Registering hedge funds with regulators and requiring disclosure of pertinent information could help minimize the moral hazard, social externalities, and systemic risk generated by the hedge fund industry.", "abstract": "Recent attempts at regulating hedge funds by registering them with regulators and requiring disclosure of pertinent information could help to minimize moral hazard, social externalities, and systemic risk generated by the hedge fund industry.", "citation": "Kaal, Hedge Fund Regulation Via Basel III (2011). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1806252", "datePublished": "2011", "claim_type": "design", "confidence": "asserted", "is_failure_mode": false, "scope_conditions": [ "extent of hedge fund involvement in the 2008 to 2009 credit crisis remains unclear" ], "source_pdf_sha256": "3343ebfe05a925c3d1a75625c4b351ccff515c50819a48d155804daacf01429d", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/1908473-016", "identifier": "kaal:claim:1908473-016", "text": "By internalizing the costs of bank failure, contingent capital can reduce moral hazard, and because a contingent debt security with a conversion trigger would presumably not default, it helps avoid contagion and systemic spillovers.", "abstract": "By internalizing bank failure costs, contingent capital may contribute to minimizing moral hazard. A contingent debt security with a conversion trigger would presumably not default and could thus help avoid contagion and systemic spillover effects, which in turn may limit systemic risk.", "citation": "Wulf A. Kaal, Christoph Henkel, Contingent Capital with Sequential Triggers (2011). SSRN: https://ssrn.com/abstract=1908473", "datePublished": "2011", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "Assumes the conversion trigger operates as designed" ], "source_pdf_sha256": "9d578dac663357529edd1f6453fcfe69bdc59ac882408d9edfde5a4c2916befa", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/1998455-001", "identifier": "kaal:claim:1998455-001", "text": "Government bailouts of systemically important financial institutions create strong incentives for those institutions to externalize the cost of their risk taking onto taxpayers.", "abstract": "Government bailouts create strong incentives to externalize the cost of SIFIs' risk taking onto taxpayers.", "citation": "Wulf A. Kaal, Initial Reflections on the Possible Application of Contingent Capital in Corporate Governance (2012). SSRN: https://ssrn.com/abstract=1998455", "datePublished": "2012", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "where governments provide bailout funding to systemically important financial institutions" ], "source_pdf_sha256": "1c16ff10a284469ba15fb7ba5523449b917388ee692d9b394f9e8c094544e32c", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/1998455-003", "identifier": "kaal:claim:1998455-003", "text": "Because governments prioritize the rescue of systemically important financial institutions over other entities, those institutions are incentivized to adopt similar risk profiles and to correlate their risks.", "abstract": "Government prioritization of SIFI bailouts could incentivize SIFIs to adopt similar risk profiles and correlate risks.", "citation": "Wulf A. Kaal, Initial Reflections on the Possible Application of Contingent Capital in Corporate Governance (2012). SSRN: https://ssrn.com/abstract=1998455", "datePublished": "2012", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "where governments visibly prioritize SIFI bailouts because of systemic implications" ], "source_pdf_sha256": "1c16ff10a284469ba15fb7ba5523449b917388ee692d9b394f9e8c094544e32c", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/1998455-020", "identifier": "kaal:claim:1998455-020", "text": "A mandatory contingent capital issuance regime induces institutions to buy their competitors' securities to satisfy regulatory obligations rather than for economic reasons, and the resulting cross holdings among systemically important institutions undermine the ability of contingent capital to limit systemic risk and contagion.", "abstract": "A detrimental result of such a practice could be CCS cross holdings among SIFIs. Cross holdings of CCS by SIFIs could undermine the effectiveness of CCS and its ability to limit systemic risk and contagion.", "citation": "Wulf A. Kaal, Initial Reflections on the Possible Application of Contingent Capital in Corporate Governance (2012). SSRN: https://ssrn.com/abstract=1998455", "datePublished": "2012", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "under a regime requiring mandatory CCS issuance", "where SIFIs are permitted to purchase each other's CCS" ], "source_pdf_sha256": "1c16ff10a284469ba15fb7ba5523449b917388ee692d9b394f9e8c094544e32c", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/1998455-028", "identifier": "kaal:claim:1998455-028", "text": "Contingent capital securities approximate the characteristics of a quasi-public good: just as ships cannot readily be excluded from a lighthouse, systemically important institutions benefit from the issuance of contingent capital by other such institutions whenever the design minimizes systemic risk and contagion.", "abstract": "CCS could have the potential to approximate quasi-public good characteristics. Similar to the difficulty of excluding ships from using the services of a lighthouse,219 SIFIs may benefit from the issuance of CCS by other SIFIs if the CCS design min- imizes systemic risk and contagion.", "citation": "Wulf A. Kaal, Initial Reflections on the Possible Application of Contingent Capital in Corporate Governance (2012). SSRN: https://ssrn.com/abstract=1998455", "datePublished": "2012", "claim_type": "definitional", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "only if the CCS design actually minimizes systemic risk and contagion" ], "source_pdf_sha256": "1c16ff10a284469ba15fb7ba5523449b917388ee692d9b394f9e8c094544e32c", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/1998455-037", "identifier": "kaal:claim:1998455-037", "text": "Combining the existing prioritization of bailouts for systemically important institutions with central bank purchases of their contingent capital in a given jurisdiction would further incentivize those institutions to adopt similar risk profiles and correlate their risks.", "abstract": "Combining bailout prioritization with central bank CCS purchases in a given jurisdiction could further incentivize SIFIs to adopt similar risk profiles and corre- late risks.", "citation": "Wulf A. Kaal, Initial Reflections on the Possible Application of Contingent Capital in Corporate Governance (2012). SSRN: https://ssrn.com/abstract=1998455", "datePublished": "2012", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "in a jurisdiction where both bailout prioritization and central bank CCS purchases occur" ], "source_pdf_sha256": "1c16ff10a284469ba15fb7ba5523449b917388ee692d9b394f9e8c094544e32c", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/1998455-040", "identifier": "kaal:claim:1998455-040", "text": "Contingent capital can facilitate an incentive structure that lets regulators rely partially on private party contracting for the design of these securities while still accounting for systemic risk.", "abstract": "Contingent capital could help fa- cilitate an incentive structure that allows regulators to rely par- tially on private party contracting for the design of CCS to ac- count for systemic risk.", "citation": "Wulf A. Kaal, Initial Reflections on the Possible Application of Contingent Capital in Corporate Governance (2012). SSRN: https://ssrn.com/abstract=1998455", "datePublished": "2012", "claim_type": "design", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "where a general regulatory framework enables rather than displaces private ordering" ], "source_pdf_sha256": "1c16ff10a284469ba15fb7ba5523449b917388ee692d9b394f9e8c094544e32c", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2061166-014", "identifier": "kaal:claim:2061166-014", "text": "Because German law fixes no threshold conditions or determining factors for market reception or market confidence, the systemic relevance and contagion determinations that turn on those factors can never be made in a reliable and objective manner.", "abstract": "The German law does not stipulate any threshold conditions or determining factors for market reception or confidence. As a result, it will always be difficult to determine any of these factors in a reliable and objective manner.", "citation": "Christoph K. Henkel, Wulf A. Kaal, Contingent Capital in European Union Bank Restructuring (2012). SSRN: https://ssrn.com/abstract=2061166", "datePublished": "2012", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "determination of systemic threat under the German Banking Act" ], "source_pdf_sha256": "43625ea260d0fc045e86d3435df50c9d0ca4abf8542e6085a6165be6653b4a7b", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2061166-029", "identifier": "kaal:claim:2061166-029", "text": "Building critical mass in the contingent capital securities market could require banks and other financial institutions to buy their competitors' contingent capital securities, which would raise ethical, antitrust and incentive concerns.", "abstract": "Developing a critical mass for the market in contingent capital securities could require banks and other financial institutions to purchase their competitors' contingent capital securities.533 That could raise ethical, antitrust, and incentive concerns.", "citation": "Christoph K. Henkel, Wulf A. Kaal, Contingent Capital in European Union Bank Restructuring (2012). SSRN: https://ssrn.com/abstract=2061166", "datePublished": "2012", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "where non-bank demand is insufficient to absorb issuance volumes" ], "source_pdf_sha256": "43625ea260d0fc045e86d3435df50c9d0ca4abf8542e6085a6165be6653b4a7b", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2097160-022", "identifier": "kaal:claim:2097160-022", "text": "Early triggers in executive compensation improve the signaling of default risk by producing the signal while default risk is present but still somewhat remote.", "abstract": "Early triggers for contingent convertible bonds in executive compensation packages may increase and optimize the signaling of default risk at a time when the risk of default is present but still somewhat remote.", "citation": "Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160", "datePublished": "2012", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [], "source_pdf_sha256": "1e1f8aa246bce19f4658dbceb455c7c2a272aa5d63a9e9bdaa46a3a5a87680fc", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2150377-010", "identifier": "kaal:claim:2150377-010", "text": "Form PF reporting achieves broad coverage of systemic exposure with narrow coverage of firms: the SEC expects the small set of large filers to account for eighty percent of total hedge fund assets under management in the United States.", "abstract": "The SEC expects this relatively small number of advisers to account for 80% of total hedge fund assets under management in the United States.145", "citation": "Wulf A. Kaal, Hedge Fund Manager Registration Under the Dodd-Frank Act (2012). SSRN: https://ssrn.com/abstract=2150377", "datePublished": "2012", "claim_type": "empirical", "confidence": "evidenced", "is_failure_mode": false, "scope_conditions": [ "advisers with at least $1.5 billion in RAUM attributable to hedge funds", "SEC estimates at the time of Form PF adoption" ], "source_pdf_sha256": "0b58bb409cac7674d78515f5374096f9a349de3bbd1983c990e0edc85a635a09", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2150377-011", "identifier": "kaal:claim:2150377-011", "text": "Quarterly rather than annual Form PF updating for large hedge fund advisers is designed for timeliness: its purpose is to give the Financial Stability Oversight Council data current enough to identify emerging trends in systemic risk.", "abstract": "Mandatory quarterly reporting for large hedge fund advisers in the United States aligns with international trends and is intended \"to provide the FSOC with timely data to identify emerging trends in systemic risk.\"151", "citation": "Wulf A. Kaal, Hedge Fund Manager Registration Under the Dodd-Frank Act (2012). SSRN: https://ssrn.com/abstract=2150377", "datePublished": "2012", "claim_type": "design", "confidence": "evidenced", "is_failure_mode": false, "scope_conditions": [ "advisers with at least $1.5 billion RAUM attributable to hedge funds" ], "source_pdf_sha256": "0b58bb409cac7674d78515f5374096f9a349de3bbd1983c990e0edc85a635a09", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2150377-039", "identifier": "kaal:claim:2150377-039", "text": "Mandatory reporting does not guarantee informative reporting: anecdotal evidence indicates that advisers can present the information required in Forms ADV and PF in ways that in effect flatten out and sanitize the disclosures.", "abstract": "Anecdotal evidence suggests that the information disclosed by hedge fund advisers in the required Forms ADV and PF can be presented in ways that in effect \"flatten out\" and \"sanitize\" the disclosures.", "citation": "Wulf A. Kaal, Hedge Fund Manager Registration Under the Dodd-Frank Act (2012). SSRN: https://ssrn.com/abstract=2150377", "datePublished": "2012", "claim_type": "mechanism", "confidence": "speculative", "is_failure_mode": true, "scope_conditions": [ "anecdotal evidence, the level of sanitizing cannot be verified" ], "source_pdf_sha256": "0b58bb409cac7674d78515f5374096f9a349de3bbd1983c990e0edc85a635a09", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2150377-040", "identifier": "kaal:claim:2150377-040", "text": "If advisers sanitize their Form ADV and Form PF filings, the disclosures become less useful for FSOC and SEC evaluation and undermine the very determination of systemic risk posed by private funds that the reporting regime was built to enable.", "abstract": "Although the level of sanitizing of disclosures cannot be verified, sanitized disclosures could be less useful for FSCO and SEC evaluation and their determination of the systemic risk posed by private funds.", "citation": "Wulf A. Kaal, Hedge Fund Manager Registration Under the Dodd-Frank Act (2012). SSRN: https://ssrn.com/abstract=2150377", "datePublished": "2012", "claim_type": "failure", "confidence": "speculative", "is_failure_mode": true, "scope_conditions": [ "to the extent disclosures are in fact sanitized, which the Author states cannot be verified" ], "source_pdf_sha256": "0b58bb409cac7674d78515f5374096f9a349de3bbd1983c990e0edc85a635a09", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2273857-027", "identifier": "kaal:claim:2273857-027", "text": "Regulatory cycles make it nearly impossible to address financial regulatory concerns adequately, and systemic risk in particular is difficult to address if rules are enacted in a cyclical and reactive format.", "abstract": "Regulatory cycles also make it nearly impossible to adequately address financial regulatory concerns. Systemic risk is particularly difficult to address if rules are enacted in a cyclical and reactive format.", "citation": "Wulf A. Kaal, Dynamic Regulation of the Financial Services Industry (2013). SSRN: https://ssrn.com/abstract=2273857", "datePublished": "2013", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "rules enacted cyclically and reactively" ], "source_pdf_sha256": "e7cb3dea40593135acc99a9b00690138fe01020514ebf388f5140e1b0e59e82a", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2337268-009", "identifier": "kaal:claim:2337268-009", "text": "Congress created distinct hedge fund adviser categories in Title IV of the Dodd-Frank Act because it recognized that not all hedge fund advisers pose the same systemic risks and therefore do not all require the same level of oversight.", "abstract": "When it passed the Dodd-Frank Act,17 Congress recognized that not all hedge fund advisers pose the same systemic risks and therefore require the same level of oversight. Congress therefore created different hedge fund adviser categories in Title IV of the Dodd-Frank Act.18", "citation": "Wulf A. Kaal, Investment Adviser Regulation (2013). SSRN: https://ssrn.com/abstract=2337268", "datePublished": "2013", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "hedge fund advisers under Title IV of the Dodd-Frank Act" ], "source_pdf_sha256": "7075ce35282a8ee75b81ae3dec0e19f68631beae7f3c3a00ab2827538dc9e302", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2337268-014", "identifier": "kaal:claim:2337268-014", "text": "Registering large private fund advisers works by increasing the volume of data available to regulators, which in turn may help protect against systemic risk.", "abstract": "The registration of large private fund advisers increases the availability of data and may help protect against systemic risk.", "citation": "Wulf A. Kaal, Investment Adviser Regulation (2013). SSRN: https://ssrn.com/abstract=2337268", "datePublished": "2013", "claim_type": "mechanism", "confidence": "asserted", "is_failure_mode": false, "scope_conditions": [ "large private fund advisers registered with the SEC" ], "source_pdf_sha256": "7075ce35282a8ee75b81ae3dec0e19f68631beae7f3c3a00ab2827538dc9e302", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2337268-018", "identifier": "kaal:claim:2337268-018", "text": "Registration is the gateway that makes data collection and enhanced disclosure by hedge fund managers possible, and the Dodd-Frank Act raised disclosure requirements for registered advisers specifically to address systemic risk concerns.", "abstract": "The registration of investment advisers facilitates the collection of data and enhanced disclosure by hedge fund managers. The Dodd-Frank Act increased the disclosure requirements for registered investment advisers to address concerns over systemic risk.40", "citation": "Wulf A. Kaal, Investment Adviser Regulation (2013). SSRN: https://ssrn.com/abstract=2337268", "datePublished": "2013", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "registered investment advisers after the Dodd-Frank Act" ], "source_pdf_sha256": "7075ce35282a8ee75b81ae3dec0e19f68631beae7f3c3a00ab2827538dc9e302", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2337268-025", "identifier": "kaal:claim:2337268-025", "text": "Form PF requires disclosure of the reporting fund's positions and how long it would take to liquidate them, because the SEC needs a view of portfolio liquidity rather than positions alone.", "abstract": "To help the SEC understand the liquidity of the reporting fund's portfolios, Form PF requires the investment adviser to disclose the reporting fund's positions and how long it would take to liquidate them.78", "citation": "Wulf A. Kaal, Investment Adviser Regulation (2013). SSRN: https://ssrn.com/abstract=2337268", "datePublished": "2013", "claim_type": "design", "confidence": "asserted", "is_failure_mode": false, "scope_conditions": [ "private fund advisers filing Form PF" ], "source_pdf_sha256": "7075ce35282a8ee75b81ae3dec0e19f68631beae7f3c3a00ab2827538dc9e302", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-013", "identifier": "kaal:claim:kaal-2013-acomparativeperspectiveo-013", "text": "German commentators, whose expertise German courts rely on heavily, concluded after the financial crisis that managers do not act reasonably under the German business judgment rule if the risks they take on behalf of the corporation result in the demise of the corporation.", "abstract": "German commentators (contrary to their counterparts in the United States, German courts rely heavily on the expertise of commentators) concluded that managers do not act reasonably in terms of the German business judgment rule if risks", "citation": "Kaal, A Comparative Perspective on the Limitations of the Duty of Oversight โ€“ A Comment on Lisa Fairfax (2013)", "datePublished": "2013", "claim_type": "empirical", "confidence": "evidenced", "is_failure_mode": false, "scope_conditions": [ "Germany", "post financial crisis evaluation of liability rules" ], "source_pdf_sha256": "ac5c955fe01209c54c78c4575c0b8bf570e5f1259c3f855510697cf51a32e59a", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2389416-011", "identifier": "kaal:claim:2389416-011", "text": "The quarterly Form PF reporting obligation imposed on hedge fund advisers with more than $1.5 billion in regulatory assets under management is designed to give the FSOC timely data for identifying systemic risk trends.", "abstract": "The quarterly reporting requirement for large hedge fund advisers is intended to provide timely data that enables the FSOC to identify trends in systemic risk (IA Release 3308).", "citation": "Wulf A. Kaal, Barbara Luppi, Sandra Paterlini, Did the Dodd-Frank Act Impact Hedge Fund Performance (2014). SSRN: https://ssrn.com/abstract=2389416", "datePublished": "2014", "claim_type": "design", "confidence": "asserted", "is_failure_mode": false, "scope_conditions": [ "advisers with RAUM above $1.5 billion attributable to hedge funds" ], "source_pdf_sha256": "0e1c4615b104821577498d9655de43b9c5c3e985bb0215f56c038b8232be65c3", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2389423-008", "identifier": "kaal:claim:2389423-008", "text": "A surplus of larger private fund advisers holding correspondingly larger amounts of assets under management could increase systemic risk, so a regulation that consolidates the industry may work against its own systemic risk objective.", "abstract": "A surplus of larger private fund advisers with correspondingly larger amounts in AUM could increase systemic risk.", "citation": "Wulf A. Kaal, The Impact of Dodd-Frank Act Compliance Cost on the Hedge Fund Industry (2014). SSRN: https://ssrn.com/abstract=2389423", "datePublished": "2014", "claim_type": "predictive", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "if Title IV compliance cost drives consolidation toward larger advisers" ], "source_pdf_sha256": "6b95323abbaffd00a012589531859f2938ab8b372d0243171059ff82e55a0838", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2389423-013", "identifier": "kaal:claim:2389423-013", "text": "Registered investment advisers must report systemic risk relevant information to the SEC, including trading practices, trading and investment positions, the amount of assets under management, valuation policies, and side letters.", "abstract": "Investment advisers must provide reports with respect to certain information related to systemic risk (Dodd-Frank ยง 404(b)(3)), such as trading practices, trading and investment positions, the amount of AUM, valuation policies, side letters", "citation": "Wulf A. Kaal, The Impact of Dodd-Frank Act Compliance Cost on the Hedge Fund Industry (2014). SSRN: https://ssrn.com/abstract=2389423", "datePublished": "2014", "claim_type": "definitional", "confidence": "asserted", "is_failure_mode": false, "scope_conditions": [ "investment advisers registered under Title IV" ], "source_pdf_sha256": "6b95323abbaffd00a012589531859f2938ab8b372d0243171059ff82e55a0838", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2447306-004", "identifier": "kaal:claim:2447306-004", "text": "If advisers' allegations that Form PF disclosures cannot be answered other than by guessing are correct, then the SEC's capacity to evaluate the data is compromised, and regulation built on incomplete and misleading data will itself be questionable.", "abstract": "If these allegations should be true, the SEC's ability to evaluate and assess the data could be compromised. The use of incomplete and misleading data could lead to the development of questionable policies and regulations applicable to the private fund industry.", "citation": "Wulf A. Kaal, Private Fund Disclosures Under the Dodd-Frank Act (2014). SSRN: https://ssrn.com/abstract=2447306", "datePublished": "2014", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "conditional on the accuracy of anecdotal reports from advisers" ], "source_pdf_sha256": "0c950d73240845e78faf1c3ca0ab820fcc50556faf7ff07f7f773d0876f0be8a", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2447306-011", "identifier": "kaal:claim:2447306-011", "text": "Advisers themselves understand Form PF's purpose the way the statute frames it: most respondents identified assessing systemic risk and closing the historical information gap about private funds as the form's purpose.", "abstract": "Most advisers assert that the purpose of Form PF is to assess systemic risk and address the lack of information regarding private funds.", "citation": "Wulf A. Kaal, Private Fund Disclosures Under the Dodd-Frank Act (2014). SSRN: https://ssrn.com/abstract=2447306", "datePublished": "2014", "claim_type": "empirical", "confidence": "evidenced", "is_failure_mode": false, "scope_conditions": [ "responses to survey Question 10" ], "source_pdf_sha256": "0c950d73240845e78faf1c3ca0ab820fcc50556faf7ff07f7f773d0876f0be8a", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2447306-038", "identifier": "kaal:claim:2447306-038", "text": "Respondents argued that the SEC's systemic risk objective would have been advanced more directly by asking a smaller set of targeted questions, emphasizing open derivatives positions, the entity's total market exposure, and its total underlying capital.", "abstract": "the SEC's objective of limiting systemic risk could have been better more strongly advanced by asking questions in Form PF with an emphasis on open derivatives positions,56 total market exposure of the entity, and total underlying capital.", "citation": "Wulf A. Kaal, Private Fund Disclosures Under the Dodd-Frank Act (2014). SSRN: https://ssrn.com/abstract=2447306", "datePublished": "2014", "claim_type": "design", "confidence": "evidenced", "is_failure_mode": false, "scope_conditions": [ "open-ended responses to survey Question 8b" ], "source_pdf_sha256": "0c950d73240845e78faf1c3ca0ab820fcc50556faf7ff07f7f773d0876f0be8a", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2470008-001", "identifier": "kaal:claim:2470008-001", "text": "The SEC data collected from private fund advisers feeds every stage of the FSOC's systemic risk assessment, and the FSOC leans most heavily on precisely those disclosure items that are the most problematic.", "abstract": "The author shows that while the SEC's data plays a crucial role in all stages of FSOC's systemic risk assessment of private fund advisers, the FSOC relies most heavily on some of the most problematic disclosure items collected by the SEC.", "citation": "Wulf A. Kaal, The Systemic Risk of Private Funds after the Dodd-Frank Act (2014). SSRN: https://ssrn.com/abstract=2470008", "datePublished": "2014", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "private fund advisers reporting under SEC Form PF", "FSOC systemic risk assessment of nonbank financial companies" ], "source_pdf_sha256": "5f68a401c935527d89658171e9b48a4d186710459aaf2bdbead755507394e8c9", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2470008-002", "identifier": "kaal:claim:2470008-002", "text": "Accuracy and consistency problems in the SEC's private fund data collection can impair the FSOC's ability to evaluate the systemic risk posed by private fund advisers.", "abstract": "Evidence that the SEC's data collection encounters accuracy and consistency problems might hamper the FSOC's ability to evaluate the systemic risk of private fund advisers.", "citation": "Wulf A. Kaal, The Systemic Risk of Private Funds after the Dodd-Frank Act (2014). SSRN: https://ssrn.com/abstract=2470008", "datePublished": "2014", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "data collected through Form PF", "FSOC evaluation of nonbank systemic risk" ], "source_pdf_sha256": "5f68a401c935527d89658171e9b48a4d186710459aaf2bdbead755507394e8c9", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2470008-003", "identifier": "kaal:claim:2470008-003", "text": "Prior studies and anecdotal evidence indicate that the data collection mandated by Form PF could itself create problems for the FSOC when it evaluates hedge fund systemic risk.", "abstract": "Several observations from previous studies and anecdotal evidence suggest that the mandated data collection in Form PF could create issues for FSOC in evaluating the systemic risk of hedge funds.", "citation": "Wulf A. Kaal, The Systemic Risk of Private Funds after the Dodd-Frank Act (2014). SSRN: https://ssrn.com/abstract=2470008", "datePublished": "2014", "claim_type": "empirical", "confidence": "evidenced", "is_failure_mode": true, "scope_conditions": [ "hedge fund systemic risk evaluation by FSOC" ], "source_pdf_sha256": "5f68a401c935527d89658171e9b48a4d186710459aaf2bdbead755507394e8c9", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2470008-005", "identifier": "kaal:claim:2470008-005", "text": "The systemic risk of hedge funds arises principally from the combination of aggressive investment strategies and high leverage with adverse price movements that can dry up credit and depress the market price of collateral.", "abstract": "Hedge funds' systemic risk is mainly the result of their pursuit of aggressive investment strategies and a significant level of leverage in combination with adverse fluctuations in market prices that can dry up credit and negatively affect the market price of collateral.", "citation": "Wulf A. Kaal, The Systemic Risk of Private Funds after the Dodd-Frank Act (2014). SSRN: https://ssrn.com/abstract=2470008", "datePublished": "2014", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "hedge funds employing leverage", "periods of adverse market price fluctuations" ], "source_pdf_sha256": "5f68a401c935527d89658171e9b48a4d186710459aaf2bdbead755507394e8c9", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2470008-006", "identifier": "kaal:claim:2470008-006", "text": "Hedge funds threaten the financial system through two distinct channels: directly, by damaging systemically important financial institutions, and indirectly, by generating liquidity shocks and raising volatility in key markets.", "abstract": "In addition to posing a direct systemic risk by damaging systemically important financial institutions, hedge funds can also pose an indirect threat to the financial system by generating a liquidity shock and increasing market volatility in key markets.", "citation": "Wulf A. Kaal, The Systemic Risk of Private Funds after the Dodd-Frank Act (2014). SSRN: https://ssrn.com/abstract=2470008", "datePublished": "2014", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "hedge funds active in key markets", "counterparty relationships with systemically important institutions" ], "source_pdf_sha256": "5f68a401c935527d89658171e9b48a4d186710459aaf2bdbead755507394e8c9", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2470008-007", "identifier": "kaal:claim:2470008-007", "text": "The 2008 to 2009 financial crisis altered market conditions and the factors driving private fund systemic risk, which triggered a second, distinct wave of scholarship on private funds' systemic implications.", "abstract": "The 2008-09 global financial crisis changed market conditions and several related factors that contribute to private funds advisers' posing a possible systemic risk, precipitating the second major wave of scholarship in the context of possible systemic implications of private funds.", "citation": "Wulf A. Kaal, The Systemic Risk of Private Funds after the Dodd-Frank Act (2014). SSRN: https://ssrn.com/abstract=2470008", "datePublished": "2014", "claim_type": "empirical", "confidence": "evidenced", "is_failure_mode": false, "scope_conditions": [ "post crisis period after 2009" ], "source_pdf_sha256": "5f68a401c935527d89658171e9b48a4d186710459aaf2bdbead755507394e8c9", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2470008-009", "identifier": "kaal:claim:2470008-009", "text": "The unprecedented growth of the private fund industry combined with the low interest rate environment created by post crisis quantitative easing drove private fund managers to reach for yield.", "abstract": "The unprecedented growth in the private fund industry in combination with the low interest rate environment following the Federal Reserve's quantitative easing after the financial crisis of 2008-09 resulted in private fund managers' increasingly \"reaching for yield\".", "citation": "Wulf A. Kaal, The Systemic Risk of Private Funds after the Dodd-Frank Act (2014). SSRN: https://ssrn.com/abstract=2470008", "datePublished": "2014", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "low interest rate environment following quantitative easing", "post 2009 private fund industry" ], "source_pdf_sha256": "5f68a401c935527d89658171e9b48a4d186710459aaf2bdbead755507394e8c9", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2470008-012", "identifier": "kaal:claim:2470008-012", "text": "National regulators reached opposite conclusions on the same question: unlike the OFR, FSB and IOSCO, the United Kingdom's Financial Services Authority concluded from its first comprehensive survey of London's hedge fund industry that the industry poses no systemic risk.", "abstract": "In contrast with the OFR, FSB and IOSCO, the Financial Services Authority (FSA) in the United Kingdom concluded in its first comprehensive survey of London's hedge fund industry that the hedge fund industry poses no systemic risk to the financial system.", "citation": "Wulf A. Kaal, The Systemic Risk of Private Funds after the Dodd-Frank Act (2014). SSRN: https://ssrn.com/abstract=2470008", "datePublished": "2014", "claim_type": "empirical", "confidence": "evidenced", "is_failure_mode": false, "scope_conditions": [ "London hedge fund industry as surveyed by the FSA", "conditions prevailing at the time of the survey" ], "source_pdf_sha256": "5f68a401c935527d89658171e9b48a4d186710459aaf2bdbead755507394e8c9", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2470008-027", "identifier": "kaal:claim:2470008-027", "text": "The FSOC itself conceded that available data was insufficient when it tried to identify the activities of the twenty largest United States fund managers as possible sources of systemic risk.", "abstract": "Similarly, in its attempt to identify activities of twenty of the largest U.S. fund managers as possible sources of systemic risk,171 the FSOC acknowledged that the available data was insufficient", "citation": "Wulf A. Kaal, The Systemic Risk of Private Funds after the Dodd-Frank Act (2014). SSRN: https://ssrn.com/abstract=2470008", "datePublished": "2014", "claim_type": "empirical", "confidence": "evidenced", "is_failure_mode": true, "scope_conditions": [ "FSOC 2013 annual report", "counterparty risk, leverage, repo, securities lending, and separate accounts" ], "source_pdf_sha256": "5f68a401c935527d89658171e9b48a4d186710459aaf2bdbead755507394e8c9", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2470008-033", "identifier": "kaal:claim:2470008-033", "text": "Because several core Form PF questions feeding the FSOC's stage one threshold screen are themselves defective, the FSOC's systemic risk assessment process could be compromised.", "abstract": "Given the identified shortcomings of Form PF data, the systemic risk assessment process employed by the FSOC could be compromised. Several core Form PF questions that provide specific information for FSOC's stage one threshold assessment encounter problems.", "citation": "Wulf A. Kaal, The Systemic Risk of Private Funds after the Dodd-Frank Act (2014). SSRN: https://ssrn.com/abstract=2470008", "datePublished": "2014", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "FSOC stage one threshold assessment", "reliance on Form PF questions with identified defects" ], "source_pdf_sha256": "5f68a401c935527d89658171e9b48a4d186710459aaf2bdbead755507394e8c9", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2470008-037", "identifier": "kaal:claim:2470008-037", "text": "If the FSOC relies on inaccurate Form PF data in its systemic risk assessment, its work on private funds may itself be erroneous.", "abstract": "If FSOC relies on Form PF data in its systemic risk assessment that is subject to inaccuracies, it appears possible that FSOC's work pertaining to private funds could in turn be subject to errors.", "citation": "Wulf A. Kaal, The Systemic Risk of Private Funds after the Dodd-Frank Act (2014). SSRN: https://ssrn.com/abstract=2470008", "datePublished": "2014", "claim_type": "condition", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "FSOC reliance on Form PF data subject to inaccuracies" ], "source_pdf_sha256": "5f68a401c935527d89658171e9b48a4d186710459aaf2bdbead755507394e8c9", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2470008-038", "identifier": "kaal:claim:2470008-038", "text": "Private fund advisers reporting under Form PF encountered issues that could affect the FSOC's systemic risk assessment, but the author does not claim that the FSOC is unable to fulfill its congressional mandate.", "abstract": "The article suggests that private fund advisers who reported data as required by SEC Form PF encountered issues that could affect FSOC's systemic risk assessment of private funds. The author does not suggest that the FSOC is unable to fulfill Congress's mandate.", "citation": "Wulf A. Kaal, The Systemic Risk of Private Funds after the Dodd-Frank Act (2014). SSRN: https://ssrn.com/abstract=2470008", "datePublished": "2014", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "scope limited to the effects of Form PF reporting issues" ], "source_pdf_sha256": "5f68a401c935527d89658171e9b48a4d186710459aaf2bdbead755507394e8c9", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2470008-039", "identifier": "kaal:claim:2470008-039", "text": "Matching the identified Form PF defects against the FSOC's specific uses of that data suggests possible inaccuracies in the FSOC's systemic risk assessment process, although the author disclaims scientific or empirical precision for the analysis.", "abstract": "The matching of identified Form PF issues with FSOC's respective use of such suboptimal Form PF data suggests that possible inaccuracies may exist in FSOC's systemic risk assessment process. The author does not claim scientific and/or empirical precision in the analysis.", "citation": "Wulf A. Kaal, The Systemic Risk of Private Funds after the Dodd-Frank Act (2014). SSRN: https://ssrn.com/abstract=2470008", "datePublished": "2014", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "method of matching known data defects to documented FSOC uses", "no claim of empirical precision" ], "source_pdf_sha256": "5f68a401c935527d89658171e9b48a4d186710459aaf2bdbead755507394e8c9", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2470008-040", "identifier": "kaal:claim:2470008-040", "text": "Fixing the identified problems with Form PF data would help optimize the FSOC's systemic risk assessment of private funds.", "abstract": "Addressing the identified problems with Form PF data could help optimize FSOC's systemic risk assessment of private funds.", "citation": "Wulf A. Kaal, The Systemic Risk of Private Funds after the Dodd-Frank Act (2014). SSRN: https://ssrn.com/abstract=2470008", "datePublished": "2014", "claim_type": "normative", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "Form PF data defects identified in this article" ], "source_pdf_sha256": "5f68a401c935527d89658171e9b48a4d186710459aaf2bdbead755507394e8c9", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/kaal-2014-dynamicregulationviagove-009", "identifier": "kaal:claim:kaal-2014-dynamicregulationviagove-009", "text": "Experimentation with different rules under the current framework of stable rulemaking carries substantial costs of rule revision and enactment, and there is evidence that this framework does not protect against systemic shocks and financial crises.", "abstract": "The costs of rule revision, rule enactment, and exper- imentation in the current framework of stable rulemaking are substantial, especially because there is some evidence25 that the existing rulemaking framework does not protect against systemic shocks and financial crises.", "citation": "Kaal, Dynamic Regulation via Governmental Contracts (2014)", "datePublished": "2014", "claim_type": "failure", "confidence": "evidenced", "is_failure_mode": true, "scope_conditions": [ "current framework of stable and presumptively optimal rules" ], "source_pdf_sha256": "7320aec036ccf2f6739f0854ea8749903e8902e77c2ec39543b64b358459c408", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2714974-005", "identifier": "kaal:claim:2714974-005", "text": "The collapse of Long Term Capital Management in 1998 and its Federal Reserve orchestrated bailout made hedge fund risk to international markets apparent, and concerns over excessive leverage combined with a lack of transparency drove the demand for new regulation.", "abstract": "Concerns over excessive leverage by hedge funds and a lack of transparency led to increasing demands for new regulation.", "citation": "Kaal and Oesterle, The History of Hedge Fund Regulation in the United States (2016). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2714974", "datePublished": "2016", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "applies to the post 1998 policy debate" ], "source_pdf_sha256": "7764601d3ed5bb056b58949e8411eff9dfb9855f143719062030c980c5fa801b", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2714974-032", "identifier": "kaal:claim:2714974-032", "text": "Indirect regulation through bank capital adequacy standards can reach systemic risk because those standards alter not only banks' credit standards but also counterparty credit risk and therefore hedge funds' level of leverage.", "abstract": "Indirect regulation through capital adequacy standards could also address issues of systemic risk because capital adequacy standards will not only regulate and alter credit standards of banks, but also counterparty credit risk and, thus, hedge funds' level of leverage.", "citation": "Kaal and Oesterle, The History of Hedge Fund Regulation in the United States (2016). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2714974", "datePublished": "2016", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "applies to banks and counterparties subject to capital adequacy standards" ], "source_pdf_sha256": "7764601d3ed5bb056b58949e8411eff9dfb9855f143719062030c980c5fa801b", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2715083-026", "identifier": "kaal:claim:2715083-026", "text": "FSOC's SIFI designation framework does not distinguish between mutual and hedge funds, even though evidence indicates designation would have disparate effects on the two asset classes.", "abstract": "While evidence exists that SIFI designation could have disparate affects on mutual and hedge funds (Stevens Letter (2015), the applicable regulatory framework does not distinguish between the two asset classes.44", "citation": "Kaal, Confluence of Mutual and Private Funds (2016). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2715083", "datePublished": "2016", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "FSOC three stage nonbank SIFI designation process", "12 C.F.R. 1310 app. A" ], "source_pdf_sha256": "b5c92186260d4a8499a14f81ee24ace093b24e7740af3effcd1c526fa4fa221e", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2715083-039", "identifier": "kaal:claim:2715083-039", "text": "The mutual fund industry of the future could carry more risk than its historical averages suggest, a possibility with systemic implications given the comparative size of the mutual fund market.", "abstract": "Given this trend, it seems at least possible that the mutual fund industry of the future could be subjected to more risk than the historical averages suggested in the past.", "citation": "Kaal, Confluence of Mutual and Private Funds (2016). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2715083", "datePublished": "2016", "claim_type": "predictive", "confidence": "speculative", "is_failure_mode": false, "scope_conditions": [ "if the trend toward simulated leverage in mutual funds continues" ], "source_pdf_sha256": "b5c92186260d4a8499a14f81ee24ace093b24e7740af3effcd1c526fa4fa221e", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2748096-001", "identifier": "kaal:claim:2748096-001", "text": "Government assessments of hedge fund systemic risk conflict directly: the OFR, FSB, and IOSCO treat private fund activities as important threats to the financial system, while the UK Financial Services Authority concluded from its first comprehensive survey of London's private fund industry that hedge funds pose no systemic risk.", "abstract": "By contrast, the Financial Services Authority (FSA) (2010) in the United Kingdom concluded in its first comprehensive survey of London's private fund industry that the hedge fund industry poses no systemic risk to the financial system.", "citation": "Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016). SSRN: https://ssrn.com/abstract=2748096", "datePublished": "2016", "claim_type": "empirical", "confidence": "evidenced", "is_failure_mode": false, "scope_conditions": [ "comparison of post-crisis U.S. and UK regulator reports" ], "source_pdf_sha256": "8f30260f2c1db728b45c4f3b9b7c64358cf9d3217277bc3c63a910c32f87b508", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2748096-002", "identifier": "kaal:claim:2748096-002", "text": "Despite conflicting government reports, the weight of post-crisis evidence from leading financial economists supports the conclusion that hedge funds introduce at least some systemic risk into the financial system.", "abstract": "Despite the mixed evidence produced by government reports on hedge funds' systemic risk, the majority of post-crisis evidence provided by leading financial economists suggests that hedge funds may play a role in introducing at least some systemic risk into the financial system.", "citation": "Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016). SSRN: https://ssrn.com/abstract=2748096", "datePublished": "2016", "claim_type": "empirical", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "post-crisis academic literature", "claim is qualified: some, not dominant, systemic risk" ], "source_pdf_sha256": "8f30260f2c1db728b45c4f3b9b7c64358cf9d3217277bc3c63a910c32f87b508", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2748096-003", "identifier": "kaal:claim:2748096-003", "text": "Public perception, rather than measured risk, is the principal driver of the hedge fund systemic risk debate and of the policy responses to it, and that perception is shaped chiefly by industry growth and by the collapse of prominent funds.", "abstract": "largely drives the debate on hedge funds' systemic risk and policy responses. Several core factors drive this perception, including, most prominently, the growth of the hedge fund industry and the collapse of prominent hedge funds.", "citation": "Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016). SSRN: https://ssrn.com/abstract=2748096", "datePublished": "2016", "claim_type": "mechanism", "confidence": "asserted", "is_failure_mode": false, "scope_conditions": [], "source_pdf_sha256": "8f30260f2c1db728b45c4f3b9b7c64358cf9d3217277bc3c63a910c32f87b508", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2748096-005", "identifier": "kaal:claim:2748096-005", "text": "The combination of unprecedented private fund industry growth and the low interest rate environment produced by post-crisis quantitative easing pushed private fund managers into reaching for yield, and the leverage and complex derivative transactions used to boost that yield further increased private funds' systemic risk.", "abstract": "The unprecedented growth in the private fund industry combined with the low interest rate environment following the Federal Reserve's quantitative easing after the financial crisis resulted in private fund managers' increasingly \"reaching for yield.\"", "citation": "Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016). SSRN: https://ssrn.com/abstract=2748096", "datePublished": "2016", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "post-2008 low interest rate environment", "quantitative easing by the Federal Reserve" ], "source_pdf_sha256": "8f30260f2c1db728b45c4f3b9b7c64358cf9d3217277bc3c63a910c32f87b508", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2748096-006", "identifier": "kaal:claim:2748096-006", "text": "Because hedge fund losses are absorbed directly by a large and dispersed body of investors and their equity capital, private fund advisers are unlikely to trigger a systemic event, and their activity may even reduce market volatility.", "abstract": "But some research suggests that private fund advisers are unlikely to trigger a systemic event because losses in hedge funds are directly absorbed by the multitude of investors and their equity capital and may actually reduce market volatility", "citation": "Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016). SSRN: https://ssrn.com/abstract=2748096", "datePublished": "2016", "claim_type": "mechanism", "confidence": "evidenced", "is_failure_mode": false, "scope_conditions": [ "applies to funds financed by investor equity rather than short term debt" ], "source_pdf_sha256": "8f30260f2c1db728b45c4f3b9b7c64358cf9d3217277bc3c63a910c32f87b508", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2748096-011", "identifier": "kaal:claim:2748096-011", "text": "The opacity of the hedge fund shadow banking system blocks direct measurement of hedge funds' role in the crisis, leaving researchers with indirect measures extracted from existing data rather than primary pre-crisis sources.", "abstract": "the shadow banking system of hedge funds and the lack of sufficient transparency create substantial obstacles to implementing direct measures, especially without the access to primary sources of data regarding hedge funds before the crisis.", "citation": "Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016). SSRN: https://ssrn.com/abstract=2748096", "datePublished": "2016", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "absence of access to primary pre-crisis hedge fund data" ], "source_pdf_sha256": "8f30260f2c1db728b45c4f3b9b7c64358cf9d3217277bc3c63a910c32f87b508", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2748096-012", "identifier": "kaal:claim:2748096-012", "text": "The contagion story, in which hedge fund losses spread to other financial institutions and undermine systemic stability, is counterbalanced in practice because hedge fund collapses are rarely sudden and almost always unfold in incremental steps over a long period.", "abstract": "First, hedge fund collapses are rarely sudden but in practice almost always occur in incremental steps over a long time period.", "citation": "Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016). SSRN: https://ssrn.com/abstract=2748096", "datePublished": "2016", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "describes observed hedge fund collapse dynamics rather than theoretical models" ], "source_pdf_sha256": "8f30260f2c1db728b45c4f3b9b7c64358cf9d3217277bc3c63a910c32f87b508", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2748096-017", "identifier": "kaal:claim:2748096-017", "text": "The performance pressure on hedge fund managers incentivizes them to take disproportionately high risks in order to deliver sufficient client returns, and those disproportionate risks translate into proportional systemic risks.", "abstract": "Arguably, in order to obtain sufficient returns for their clients, hedge fund managers are incentivized to take disproportionately high risks in their management strategies, which can translate into proportional systemic risks.", "citation": "Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016). SSRN: https://ssrn.com/abstract=2748096", "datePublished": "2016", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "holds where managers must generate returns sufficient to retain clients" ], "source_pdf_sha256": "8f30260f2c1db728b45c4f3b9b7c64358cf9d3217277bc3c63a910c32f87b508", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2748096-020", "identifier": "kaal:claim:2748096-020", "text": "The systemic risk of hedge fund leverage comes from its capacity to amplify liquidity losses and to contribute to asset overvaluation during bull markets, not from leverage as such.", "abstract": "Systemic risks associated with hedge funds' use of leverage stems from its ability to amplify liquidity losses and contribute to the overvaluation of assets during bull markets.", "citation": "Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016). SSRN: https://ssrn.com/abstract=2748096", "datePublished": "2016", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [], "source_pdf_sha256": "8f30260f2c1db728b45c4f3b9b7c64358cf9d3217277bc3c63a910c32f87b508", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2748096-021", "identifier": "kaal:claim:2748096-021", "text": "When hedge funds simultaneously liquidate positions and reduce leverage, leverage generates a fire-sale externality that raises systemic risk, arising when a fund must sell assets it regards as drastically undervalued in order to meet margin calls or redemption requests.", "abstract": "If hedge funds simultaneously liquidate positions and reduce leverage, leverage can also increase the risk of a fire-sale externality that increases systemic risk.", "citation": "Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016). SSRN: https://ssrn.com/abstract=2748096", "datePublished": "2016", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "simultaneous deleveraging across funds", "binding margin calls or redemption requests" ], "source_pdf_sha256": "8f30260f2c1db728b45c4f3b9b7c64358cf9d3217277bc3c63a910c32f87b508", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2748096-023", "identifier": "kaal:claim:2748096-023", "text": "Strategy diversification does not insulate the hedge fund industry from systemic risk: returns across different hedge fund strategies were more correlated during the financial crisis of 2007-2008 than before it, so the industry can pose systemic risk despite investing across a broad spectrum of assets and strategies.", "abstract": "hedge fund returns should not affect their systemic risk. However, evidence exists that the returns of different hedge fund strategies were more correlated during the financial crisis of 2007-2008 than before the crisis", "citation": "Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016). SSRN: https://ssrn.com/abstract=2748096", "datePublished": "2016", "claim_type": "failure", "confidence": "evidenced", "is_failure_mode": true, "scope_conditions": [ "periods of market stress", "evidence drawn from the 2007-2008 crisis" ], "source_pdf_sha256": "8f30260f2c1db728b45c4f3b9b7c64358cf9d3217277bc3c63a910c32f87b508", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2748096-025", "identifier": "kaal:claim:2748096-025", "text": "The growth of hedge fund replication strategies packaged in exchange traded funds may further increase the systemic risks associated with certain hedge fund strategies.", "abstract": "The growth of hedge fund replication strategies in exchange-traded funds (ETFs) may further increase hedge funds' systemic risks associated with certain strategies (Ramaswamy 2011).", "citation": "Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016). SSRN: https://ssrn.com/abstract=2748096", "datePublished": "2016", "claim_type": "predictive", "confidence": "speculative", "is_failure_mode": false, "scope_conditions": [ "applies to ETF based replication of hedge fund strategies" ], "source_pdf_sha256": "8f30260f2c1db728b45c4f3b9b7c64358cf9d3217277bc3c63a910c32f87b508", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2748096-039", "identifier": "kaal:claim:2748096-039", "text": "Hedge funds have the potential both to amplify and to mitigate systemic risk, and which effect dominates turns on their particular risk management incentives, leverage, and investment strategies, which is why the academic evidence remains mixed.", "abstract": "Hedge funds may have the potential to amplify and/or mitigate systemic risks due to their particular risk management incentives, leverage, and investment strategies.", "citation": "Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016). SSRN: https://ssrn.com/abstract=2748096", "datePublished": "2016", "claim_type": "condition", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "conclusion drawn from the mixed post-crisis literature" ], "source_pdf_sha256": "8f30260f2c1db728b45c4f3b9b7c64358cf9d3217277bc3c63a910c32f87b508", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2748096-040", "identifier": "kaal:claim:2748096-040", "text": "The most useful product of the post-crisis empirical literature for regulators is a set of methodologies for evaluating hedge fund systemic risk and prescribing remedies, especially methodologies addressing the counterparty credit measures of hedge funds and their prime brokers.", "abstract": "The extensive results of the post-crisis empirical studies provide regulators with an abundance of methodologies to evaluate the extent of these risks and to prescribe potential remedies, especially regarding the counterparty credit measures of hedge funds and their prime brokers.", "citation": "Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016). SSRN: https://ssrn.com/abstract=2748096", "datePublished": "2016", "claim_type": "design", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "directed at regulators evaluating hedge fund systemic risk" ], "source_pdf_sha256": "8f30260f2c1db728b45c4f3b9b7c64358cf9d3217277bc3c63a910c32f87b508", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2816408-013", "identifier": "kaal:claim:2816408-013", "text": "The quarterly Form PF reporting obligation imposed on advisers with more than $1.5 billion in regulatory assets under management attributable to private funds exists to give the FSOC timely data for identifying trends in systemic risk.", "abstract": "The quarterly reporting requirement for large private fund advisers is intended to provide timely data that enables the FSOC to identify trends in systemic risk (IA Release 3308).", "citation": "Wulf A. Kaal, Barbara Luppi, Sandra Paterlini, Did the Dodd-Frank Act Impact Private Fund Performance โ€“ Evidence from 2010 โ€“ 2015 (2016). SSRN: https://ssrn.com/abstract=2816408", "datePublished": "2016", "claim_type": "design", "confidence": "asserted", "is_failure_mode": false, "scope_conditions": [ "advisers with RAUM above $1.5 billion attributable to private funds" ], "source_pdf_sha256": "dc3b2f9e60e42ea1b42c2e0062d65569675b014c05fcd30b15ad44d2410b2ce7", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2957645-007", "identifier": "kaal:claim:2957645-007", "text": "By internalizing the costs of bank failure, contingent capital may be able to minimize moral hazard, avoid financial contagion, and limit systemic risk.", "abstract": "By internalizing bank failure costs, contingent capital may be able to minimize moral hazard,14 avoid financial contagion,15 and limit systemic risk.16", "citation": "Kaal, Dynamic Regulation via Contingent Capital (2017). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2957645", "datePublished": "2017", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "bank failure costs are actually borne by the institution's own capital structure" ], "source_pdf_sha256": "250b10782a5ea5dece9235a7f711aee408feaf36f2e78e310d589b5ee6304be2", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2998097-021", "identifier": "kaal:claim:2998097-021", "text": "The SEC's private fund data collection encountered accuracy and consistency problems that hampered the FSOC's ability to evaluate the systemic risk of private funds.", "abstract": "The paper created and evaluated data evidence that demonstrated that the SEC's data collection encountered accuracy and consistency problems that hampered the FSOC's ability to evaluate the systemic risk of private funds.141 The author", "citation": "Wulf A. Kaal, Private Investment Fund Regulation - Theory and Empirical Evidence from 1998 to 2016 (2017). SSRN: https://ssrn.com/abstract=2998097", "datePublished": "2017", "claim_type": "failure", "confidence": "evidenced", "is_failure_mode": true, "scope_conditions": [ "SEC data collection under Title IV", "FSOC systemic risk assessment" ], "source_pdf_sha256": "0955054f49c7011d33c285579bb046e6b284e42755b10fd2546a728c202669d5", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2998097-022", "identifier": "kaal:claim:2998097-022", "text": "The FSOC relied most heavily on some of the most problematic disclosure items the SEC collects, even though SEC data played a crucial role at every stage of its systemic risk assessment of private funds.", "abstract": "The author showed that while the SEC's data played a crucial role in all stages of FSOC's systemic risk assessment of private funds, the FSOC relied most heavily on some of the most problematic disclosure items collected by the SEC.", "citation": "Wulf A. Kaal, Private Investment Fund Regulation - Theory and Empirical Evidence from 1998 to 2016 (2017). SSRN: https://ssrn.com/abstract=2998097", "datePublished": "2017", "claim_type": "failure", "confidence": "evidenced", "is_failure_mode": true, "scope_conditions": [ "FSOC systemic risk assessment of private funds", "post Dodd-Frank Form PF data" ], "source_pdf_sha256": "0955054f49c7011d33c285579bb046e6b284e42755b10fd2546a728c202669d5", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/2998097-025", "identifier": "kaal:claim:2998097-025", "text": "If the FSOC relies on Form PF data that is subject to inaccuracies, because uncertain filers complete the form using estimates and assumptions, then the FSOC's own work on private funds may in turn be subject to errors.", "abstract": "If FSOC relied on Form PF data in its systemic risk assessment that is subject to inaccuracies, the paper suggested that it appeared possible that FSOC's work pertaining to private funds could in turn be subject to errors.149", "citation": "Wulf A. Kaal, Private Investment Fund Regulation - Theory and Empirical Evidence from 1998 to 2016 (2017). SSRN: https://ssrn.com/abstract=2998097", "datePublished": "2017", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "over 40 percent of surveyed filers disagreed with Form PF definitions or instructions" ], "source_pdf_sha256": "0955054f49c7011d33c285579bb046e6b284e42755b10fd2546a728c202669d5", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3405660-009", "identifier": "kaal:claim:3405660-009", "text": "Before its collapse LTCM held roughly $4.8 billion in capital while controlling $160 billion in stocks and bonds, with derivatives of a notional value of $1 trillion.", "abstract": "LTCM had $4.8 billion in capital prior to the crash and controlled $160 billion in stocks and bonds. In addition, derivatives of the fund had a notional value of $1 trillion.", "citation": "Kaal, Indirect Regulation of Hedge Funds (2019). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3405660", "datePublished": "2019", "claim_type": "empirical", "confidence": "evidenced", "is_failure_mode": false, "scope_conditions": [ "position as of the period immediately before the 1998 crash" ], "source_pdf_sha256": "cf507b1833071765bc13a5605f38c2591582eca85f40869e38b6ff075c04d29d", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3405660-011", "identifier": "kaal:claim:3405660-011", "text": "LTCM reached systemically dangerous size because banks lent to it without regard to repayment capacity, and in doing so the banks endangered their own existence.", "abstract": "LTCM grew as large as it did because banks lent it money without regard for whether this money could be paid back. Banks put their own existence at risk with their lending practices during this time.", "citation": "Kaal, Indirect Regulation of Hedge Funds (2019). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3405660", "datePublished": "2019", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [], "source_pdf_sha256": "cf507b1833071765bc13a5605f38c2591582eca85f40869e38b6ff075c04d29d", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3405660-014", "identifier": "kaal:claim:3405660-014", "text": "Additional direct limitations on hedge funds spill over onto other private investment pools such as venture capital funds and structured financings, which do not present the same systemic risk concerns.", "abstract": "The imposition of additional limitations on hedge funds can impose unwarranted burdens on other types of private investment pools, such as venture capital funds and structured financings that do not raise the same concerns as hedge funds in terms of systemic risk.", "citation": "Kaal, Indirect Regulation of Hedge Funds (2019). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3405660", "datePublished": "2019", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "rules drafted broadly enough to capture private investment pools generally" ], "source_pdf_sha256": "cf507b1833071765bc13a5605f38c2591582eca85f40869e38b6ff075c04d29d", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3405660-033", "identifier": "kaal:claim:3405660-033", "text": "The Basel Framework reduces systemic risk by regulating bank credit standards, which indirectly constrains hedge fund leverage and makes credit markets safer.", "abstract": "Systemic risk problems are addressed because the Basel Framework regulates the credit standards of banks but indirectly also hedge funds' level of leverage. Hence, credit markets are saver.", "citation": "Kaal, Indirect Regulation of Hedge Funds (2019). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3405660", "datePublished": "2019", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [], "source_pdf_sha256": "cf507b1833071765bc13a5605f38c2591582eca85f40869e38b6ff075c04d29d", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3406323-027", "identifier": "kaal:claim:3406323-027", "text": "Democratized decentralized underwriting is more secure and stable than centralized underwriting because diversifying lenders and underwriters adds liquidity in all states of the economy and silos losses so that there is less cascading during economic crises.", "abstract": "it diversifies lenders and underwriters, which adds liquidity in all states of the economy; 2. this diversity silo losses so there is less cascading during economic crises;", "citation": "Wulf A. Kaal, Decentralization - A Primer on the New Economy (2019). SSRN: https://ssrn.com/abstract=3406323", "datePublished": "2019", "claim_type": "design", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "decentralized underwriting organized through an underwriting DAO" ], "source_pdf_sha256": "6293780b57a1ae1de17ec00f99cc94295d4f72ea4d08b17a5c08c44772b221db", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3411110-014", "identifier": "kaal:claim:3411110-014", "text": "Any settlement completed in less than ten seconds removes counterparty risk and with it systemic risk entirely, which makes settlement speed, not disclosure, the operative variable for systemic risk.", "abstract": "Most importantly, any settlement that takes less than 10 seconds, if ever achieved in any setting, removes counterparty risk and with it systemic risk entirely.", "citation": "Wulf A. Kaal, Samuel Evans, Blockchain-Based Securities Offerings (2019). SSRN: https://ssrn.com/abstract=3411110", "datePublished": "2019", "claim_type": "condition", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "settlement finality achieved in under ten seconds", "if such speed is ever achieved in any setting" ], "source_pdf_sha256": "c7626eeb7642045b79f8745df1f7232a8fe8bc44a1f7e87b592850e35b392b50", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3411110-015", "identifier": "kaal:claim:3411110-015", "text": "If blockchain pushes settlement finality into the seconds range, the entire regulatory infrastructure built to address counterparty and systemic risk would have to be reformed, and most systemic risk and counterparty risk regulation would become unnecessary.", "abstract": "Arguably the entire regulatory infrastructure that has been tailored to address counterparty- and systemic risk would need to be reformed if settlement finality can be increased to the seconds range with blockchain technology.", "citation": "Wulf A. Kaal, Samuel Evans, Blockchain-Based Securities Offerings (2019). SSRN: https://ssrn.com/abstract=3411110", "datePublished": "2019", "claim_type": "predictive", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [ "settlement finality in the seconds range", "blockchain based settlement adopted at scale" ], "source_pdf_sha256": "c7626eeb7642045b79f8745df1f7232a8fe8bc44a1f7e87b592850e35b392b50", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/3782220-012", "identifier": "kaal:claim:3782220-012", "text": "Automating insurance away with smart contracts risks a race to the bottom, because foregoing insurance is more efficient in the short term for an individual, yet the resulting rare unprotected tragedies can chill the entire system.", "abstract": "we must avoid a race to the bottom. It's more efficient in the short term for an individual to forego any insurance, so some will outcompete others if they are lucky enough to avoid rare tragedies. But the rare unprotected tragedies can chill the entire system.", "citation": "Craig Calcaterra, Wulf A. Kaal, The Importance of Transcendental Unifying Values for Decentralization (2021). SSRN: https://ssrn.com/abstract=3782220", "datePublished": "2021", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "automated smart contract insurance", "individually optimizing agents" ], "source_pdf_sha256": "f0bf1e80c6da60a6f8ba20630562bdf1dab171ccb5267f497dc0b815113cde99", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/4900878-010", "identifier": "kaal:claim:4900878-010", "text": "Modeling entanglement explains collective phenomena such as herd behavior and market bubbles that classical economic theories struggle to account for, and it also illuminates how economic shocks propagate.", "abstract": "Incorporating entanglement into economic models can help explain the emergence of collective behaviors, such as herd behavior and market bubbles, which are difficult to account for using classical economic theories.", "citation": "Wulf A. Kaal, Quantum Economy and Tokenomics (2024). SSRN: https://ssrn.com/abstract=4900878", "datePublished": "2024", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [], "source_pdf_sha256": "75bf96d3b751b4ad0a6ca4a32591cf026094f113e3a372aa6c61790941b391f7", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/4900880-002", "identifier": "kaal:claim:4900880-002", "text": "Because the states of economic agents are entangled, a change in one part of the economy can affect other parts instantaneously rather than through a traceable chain of transmission, producing a more interconnected and dynamic system than classical economics can describe.", "abstract": "This entanglement suggests that changes in one part of the economy can instantaneously affect other parts, leading to a more interconnected and dynamic system.", "citation": "Wulf A. Kaal, Quantum Economy and the Future of Work (2024). SSRN: https://ssrn.com/abstract=4900880", "datePublished": "2024", "claim_type": "mechanism", "confidence": "asserted", "is_failure_mode": false, "scope_conditions": [], "source_pdf_sha256": "64ea6e8b7cfb3d9a83801eba54f9b87182b842a963273ddab7f2d5305639db73", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/4900880-013", "identifier": "kaal:claim:4900880-013", "text": "Credit products such as mortgages transmit quantum cognitive effects from the individual level to the financial system, creating a feedback loop between individual and societal levels.", "abstract": "Credit products, such as mortgages, act as a vector of transmission for quantum cognitive effects and create a feedback loop between the individual and societal levels.", "citation": "Wulf A. Kaal, Quantum Economy and the Future of Work (2024). SSRN: https://ssrn.com/abstract=4900880", "datePublished": "2024", "claim_type": "mechanism", "confidence": "argued", "is_failure_mode": false, "scope_conditions": [], "source_pdf_sha256": "64ea6e8b7cfb3d9a83801eba54f9b87182b842a963273ddab7f2d5305639db73", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/4900880-014", "identifier": "kaal:claim:4900880-014", "text": "Financial derivatives are a major form of economic entanglement that played a key role in recent financial crises, with nominal values estimated at over a quadrillion dollars, which indicates how extensive entanglement in the global financial system has become.", "abstract": "The nominal value of financial derivatives has been estimated at over a quadrillion dollars, highlighting the extent of entanglement in the global financial system.", "citation": "Wulf A. Kaal, Quantum Economy and the Future of Work (2024). SSRN: https://ssrn.com/abstract=4900880", "datePublished": "2024", "claim_type": "empirical", "confidence": "evidenced", "is_failure_mode": false, "scope_conditions": [], "source_pdf_sha256": "64ea6e8b7cfb3d9a83801eba54f9b87182b842a963273ddab7f2d5305639db73", "status": "current" }, { "@type": "Claim", "@id": "https://wulfkaal.github.io/claims/5541658-025", "identifier": "kaal:claim:5541658-025", "text": "The fragmented United States approach to regulating legal AI, resting on voluntary federal standards and a patchwork of state initiatives, prioritizes innovation but fails to address systemic risks comprehensively.", "abstract": "The U.S. approach prioritizes innovation but struggles to address systemic risks comprehensively.", "citation": "Wulf A. Kaal, Morgan A. Gray, The Evolving Role of Artificial Intelligence in Law (2025). SSRN: https://ssrn.com/abstract=5541658", "datePublished": "2025", "claim_type": "failure", "confidence": "argued", "is_failure_mode": true, "scope_conditions": [ "United States federal and state oversight of AI in legal and judicial contexts" ], "source_pdf_sha256": "e543a2d698fcd522d4d02e034cc9ee1344d0015d2c824b40b9e05ab7c0728c60", "status": "current" } ], "description": "85 claims in the published works of Wulf A. Kaal carry the concept tag 'systemic-risk'. Derived node: a roster, not an adjudicated definition." }