Financial Risk Manager Part 1

The second panic period of the 2007-2009 financial crisis was indeed triggered by the declaration of bankruptcy by Lehman Brothers. This event occurred in September 2008. Lehman Brothers was the largest underwriter of securitized assets at the time. When news of their bankruptcy filing broke, investors quickly lost confidence in financial institutions. This loss of confidence triggered what is known as 'runs', where many investors attempted to salvage their money by withdrawing it from these institutions. This mass withdrawal of funds further exacerbated the financial crisis, leading to the second panic period.

Choice A is incorrect. The total collapse of the commercial paper market was a characteristic of the first panic period, not the second. This event had already occurred and thus could not have triggered the second panic period.

Choice B is incorrect. While there were indeed numerous bankruptcy filings among financial conglomerates during this time, these were more a result of the crisis rather than a trigger for it. Furthermore, these bankruptcies occurred throughout both panic periods and therefore cannot be specifically linked to triggering the second one.

Choice D is incorrect. The collapse of the shadow banking system was an outcome that spanned across both periods but it wasn't a specific trigger for either one of them. It's more accurate to say that it was an effect rather than cause of these panics.