Question: Explain the difference between herding and limits to arbitrage. Show in a precise way how can a bank make so much more with leverage. Then

  1. Explain the difference between herding and limits to arbitrage.

  1. Show in a precise way how can a bank make so much more with leverage. Then show how they can lose so much more with leverage.

  1. Explain (in a precise way) the vicious and virtuous circles that take place using mark to market accounting in banking.

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