We believed the financial markets would generally perform their task efficiently and smoothly. And if financial markets do what they are supposed to, at least most of the time, there is no need to model them specifically.
However, it was the financial crisis, if not beforehand, which showed that the financial markets sometimes do not do what they are supposed to be doing – and on a large scale. Let me briefly give an example of a problem in the financial markets which, I believe, played a central role in the crisis: banks’ systemic importance, the “too-big-to-fail” problem.