Securities markets can function efficiently only after proper pricing for risks and returns is made. Therefore, it is deemed desirable that many investors who have a variety of evaluation criteria should participate and that the markets should be highly liquid.
In contrast, the vulnerabilities associated with a crisis are preexisting features of the financial system that amplify and propagate the initial shocks. Examples of vulnerabilities include high levels of leverage, maturity transformation, interconnectedness, and complexity, all of which have the potential to magnify shocks to the financial system.