Among the first reactions to the subprime crisis we saw the breakdown of two large hedge funds and witnessed serious problems in conduits and SIVs which had invested in subprime credit risk and could not find buyers for the commercial paper they had issued to refinance themselves.
The outstanding volume of ABCP declined from more than USD 1,100 billion in the summer of 2007 to below USD 900 billion in October. The problems then spread to the banking sector. The complex structure of some derivative instruments made it extremely difficult to assess the risk exposure of individual market participants.