Prior to the July 2007 rude awakening from a false sense of security of financial markets participants, observers and regulators at large, these three broad factors contrived a convergence of mechanisms that resulted in the upward spiralling of asset prices, further leveraging, increasing complexity and shrinking transparency.
In closer immediacy, they together also shaped the particular mechanisms that unleashed the turmoil, First, it took one substantial shock to a single market segment (US sub-prime related credit) to trigger a broad-based drive to re-price credit risk across all classes of financial instruments and involving a wide range of financial institutions.