Risk USA: Crowded trade increases turmoil again, say CROs

Chief risk officers from four major financial institutions argued that the distress in the financial markets has been partly caused by the concentration of money chasing too few trading ideas, when speaking on a panel at this year’s annual Risk USA conference in New York.

“People don’t realise that one of the main factors that contributed to this period’s recent stress was the crowded trade, and the lack of liquidity for a particular trade once everyone gets out of the same trade,” said Madelyn Antoncic, chief risk officer at Lehman Brothers in New York.

She added that crowded trades have been experienced in the past, but there was too much complacency going into the crisis. In the second quarter of 2006, Lehman Brothers noticed the deterioration in the housing