Understanding safe performance in rapidly evolving systems: a risk management analysis of the 2010 US financial market Flash Crash with Rasmussen's risk management framework

Abstract:

Systemic events or widespread disruptions in financial markets like the Flash Crash are a public concern as they jeopardise investors’ confidence in financial markets and result in financial losses for market participants. Federal regulations for financial markets do not keep pace with the evolution and growth of financial technology including advances in algorithmic and high-frequency trading (HFT). We report an analysis of the Flash Crash which occurred on 6 May 2010 using Rasmussen's 1997 risk management framework. While the framework has been validated on a number of well-documented accidents, our work examines the framework in the context of a large-scale adverse event associated with complex technologies and automated systems capable of evolving over time. Our contribution is a set of implications of the Flash Crash associated with Rasmussen's propositions. These implications would inform regulators and risk assessment methods for rapidly evolving complex socio-technical systems.

Año de publicación:

2017

Keywords:

• regulation
• Automation
• Flash Crash
• Algorithmic trading
• Risk management
• financial markets

Fuente:

scopus