When financial innovation creates loan types unlike the legacy products used to measure credit quality, standard risk gauges can understate true exposure. That measurement gap lets lenders and investors misprice risk and fuels credit booms that end in sharp corrections.
— Policymakers and regulators need rules and monitoring that track new financial products directly, not just legacy proxies, because mismeasured risk can create systemic crises.
2026.11.03
100% relevant
The article notes PMBS risk was 'off the radar' because available gauges were based on prime mortgages rather than the new subprime products that funded the boom and bust (actor: private‑label mortgage‑backed securities; event: downgrades and collapse after 2007).
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