Financial asset prices reveal hidden risks with long-term economic impact.
The article discusses how prices of financial assets have heavy-tailed distributions, meaning extreme events are more likely than in a normal distribution. Researchers have found that asset return distributions are better described by a stable Paretian distribution. Different models have been used to capture these distributions, with a focus on long-term price trends of derivative products related to credit risk. Understanding these price fluctuations is crucial for the economy, even though these markets are still developing.