In 2010, financial markets were rocked by sudden and violent drops of about 10 percent happening in a matter of minutes, sometimes seconds. The most infamous of these events was the flash crash of May 6, 2010, when the Dow Jones lost about 9 percent of its value within minutes. This left market participants and regulators scrambling for answers to many intriguing questions: Can such a systemic event happen again? Can we engineer automated markets to be more robust? And if so, how? What are the implications for price formation?
In this lecture by Andrei Kirilenko, former Chief Economist of the U.S. Commodity Futures Trading Commission, analyzes the challenges ahead for financial innovation and the implications for financial price formation, stability, and regulation.