ABSTRACT
The fundamental misalignment infected the global financial system on an unprecedented scale, and eventually proved lethal once the boom ended and vulnerabilities became apparent. Hyman Minsky argued that booms associated with financial innovation can easily lead to speculative euphoria, increased financial fragility and eventual collapse. In economic literature, financial innovation is most commonly seen as positive force. If unregulated financial innovations are an important cause of financial crises, it will aim for tighter, or more effective, regulation. This volume explores a few stretches of highlighting many of the key issues in the dynamic relationship between financial innovations, crises, risk management and regulation. An alternative vision of the potential link between financial innovation and crisis and the subsequent need for regulation is offered in Niall Ferguson's contribution. From the perspective of the current crisis, it seems self-evident that there is a strong relationship between financial innovations, (failed) regulation and financial crisis.
