Which of the following best defines systemic risk?

The degree to which securities can easily be sold without a loss of value

The idea that due to the high amounts of business transactions between financial institutions, financial instabilities that occur in just a few

financial institutions can very easily spread to others.

The idea th$$t in a financial transaction, one party has more information than the other party

The idea that the failure of one institution is an isolated event and will not affect other institutions and markets in the financial system

Which of the following scenarios represent$($s$)$ a major source of systemic risk? Check all that apply.

Origin Savings and Loan Association originate thousands of subprime mortgages that are then sold to commercial banks, securities firms,

and other savings institutions.

Smallwood Bank, which is a fictional bank with only $100$ deposit accounts among its members, fails one day and is unable to meet its

obligations.

New Leaf Investment Bank relies heavily on short$-$term debt to finance their operations and uses their holdings of mortgage$-$backed

securities as collateral. Suddenly the prices of mortgage backed securities plummet, and they can no longer issue short$-$term debt to pay

off the principal on maturing debt.

The Financial Reform Act was passed in $2010$ to provide stability to the financial system, and it mandated that financial institutions

granting mortgages must conduct more thorough financial checks on lendees in an attempt to improve on standards that caused the

credit crisis of $2008-2009.$