The actual risk budget has, of course, grown. 6  Either perceptions of risk or risk preferences could change. In the former case, complacency about actual risks can mean taking greater risks within the same risk budget. 7  See Diamond and Rajan (2005). 8  See Gorton and Metrick (2009), Fisher (2008), and Adrian and Shin (2008) for comprehensive descriptions of these dynamics.
2 The Bank’s view on recent economic and financial developments, determined by the Policy Board at the Monetary Policy Meeting held on February 12, as the basis of monetary policy decisions. 1  BIS Review 18/1999  In the financial markets, the Japan premium and Euro-yen interest rates (both on three-month contracts) remain stable despite the approach of the fiscal year-end.