If you want an exemplar of the difference between theory and practice and the financial markets, consider what Alan Abelson writes in his Barron's column (behind the paywall) this week:
[T]he roof fell in on housing and the curtain began to come down on the jolly times for Freddie and Fannie. Today, they own or guarantee 45% of all U.S. mortgages, or a cool, $4.8 trillion worth. Looking at their balance sheets, Porter [Stansberry] points out, you find mortgages
with a face value of $1.7 trillion, supported by assets of about $70 billion in core capital. On a combined basis, they're leveraged 24-to-1, but when you toss in their off-balance sheet guarantees, that figure balloons to 68-to-1.
Since the stock market is a perfect-information market, every buyer and seller of FRE and FNM knew not only that the leverage ratio was 24-to-1, but also knew the footnotes to the annual reports well enough to understand the 68-to-1 ratios including the guarantees. And they knew that if, say, those mortgages were worth 95% of their stated value that Fannie and Freddie would have no equity left, even if their guarantees were never called.