Mortgage Insurance ( Http )

Mortgage Insurance ( Http )
(http://www–111.aig.com/AIG_Internet/AIG_2014_Annual_Report.pdf)
Mortgage Insurance (http://www.reuters.com/article/2014/07/16/us–bankofamerica–mbs–
settlement–idUSKBN0FL1B720140716)
(http://www.propertycasualty360.com/2015/11/03/moodys–warns–of–negative–impact–in–
proposed–aig–br )
(life Insurance)http://www.vault.com/company–profiles/insurance/american–general–life–
insurance–company/company–overview.aspx, http://www.vault.com/company–
profiles/insurance/american–international–group,–inc/company–overview.aspx
Property & Casualty : (http://www.trefis.com/stock/aig/articles/237266/aigs–property–and–
casualty–business/2014–04–30#footnote_0_237266 )
(http://marketrealist.com/2015/03/underwriting–profits–property–casualty–insurer/) ... Show more
content on Helpwriting.net ...
He suggested to de – conglomerate their insurance company to three single line business consisting
of Life Insurance, Property & Casualty and Mortgage insurance. The financial crisis showed us the
iconic and near failure of AIG. Had it not been for the bailout from the Federal Reserve, AIG would
have met the fate of Lehman. It took AIG half a decade to stabilize their share value which had
taken a hit. A separation at this point will turn AIG and its division into rubble.
Introduction :
AIG, one of the biggest insurance company was always considered to be way too much important
for the economy 'too big to fail ' by everyone which is why the Federal Government had to use their
bazooka for the bailout. What led the near collapse of AIG is the large amount of Credit default
swaps that they were dealing with. The loan that consumer had taken under mortgage backed
security had defaulted. Absence of stringent regulations majorly led AIG to accumulate huge amount
of assets in the form of real estate. In due course of time the real estate was termed as 'toxic ' which
was the major reason that led to the start of 'economic meltdown '. Is AIG really 'too big to fail ' or it
is a misconception prevalent in places. Carl
... Get more on HelpWriting.net ...

Inside Job 2010 Directed By Charles Ferguson
International business is the most desirable and vital phenomena in today's modern world. Most
individuals know that International Business is the necessity for the prosperity of our world. No one
can prosper without performing business internationally. When learning of how other countries
conduct International Business, a company can expand their market to appeal to citizens of these
places. However, being as close knit as we are to other countries, not everyone holds the same
values. Every business' goals is to make profit and if one company acts in an unethical matter, that
will create a downfall domino effect. This statement holds truth for the result of the
financial/banking crisis that occurred in 2008 because of many errors that were made unethically
and eventually affected many other countries around the world and their living conditions. The
documentary Inside Job 2010 directed by Charles Ferguson is without a doubt a very effective film
documentary. It did an outstanding job of giving more insight on the banking crisis in 2008 and how
it created a domino effect leading to global recession. In all honesty, this film did not shock me at all
in terms of how corrupt the financial industry in the United States is. What I found humorous in this
documentary, were the moments throughout the film where most of the important questions to be
answered followed with the next screen that said "____ declined to be interviewed for this film".
However, besides the partial humor,

Deregulation Is The Underlying Cause Of The 2007 / 08...
Deregulation is a process that removing or reducing the regulations and allowing banks to invest
(MBA lib, 2015). It allows banks to collaborate, and there's no regulations of derivatives. The
Financial crisis in 2007–2008 brought the massive hurt to everyone in the world. The worldwide
financial problem affected thirty million people loosing their jobs and cause many countries getting
close to go bankrupt (Peah, 2014). This is the global issue that everyone should be consider of. The
purpose of this essay is to determine if the deregulation was the underlying cause of the 2007/08
financial crisis. The essay argues the deregulation was the underlying cause of the 2007/08 financial
crisis in the US, because of it causes financial innovations with no regulations, subprime mortgages
increasing and lead quite a few competitions among banks. I will discuss these three parts in the
following essay. Firstly, I would focus on how deregulation causes more and more financial
innovations be made and how they resulted the financial crisis. Then I will argue that deregulation
leads to the numbers of subprime mortgages increased in the market. Due to deregulation the
subprime mortgages markets started to lose control, the market failed and caused the financial crisis
in 2007/08. Finally, I will state deregulation causes banks began multiple competitions among them
and raised the amount of subprime mortgages thus the financial crisis occurred. Deregulation, as the
beginning of the essay

Key Factors Affecting The Foreclosure Crisis
Beginning in the late 1990's and accelerating into the early and mid–2000's, mortgage lending
became easier. And it became easier for everyone involved: the borrower, the lender, the guarantor
and the investor. The rise of the risk–free, no–down payment, low–documentation loan was not only
born, but metastasized beyond imagination.
Traditionally, the biggest hurdle to home ownership was the down payment. Ever since banks began
lending, from the secondary market innovations of the depression era 1930's and through the 1990's,
a down payment was always required. You could not buy a home unless you were willing to first put
up some of your own money. Three factors changed this equation, and when combined this change
proved unstoppable: ... Show more content on Helpwriting.net ...
Investors felt protected because of the credit default swap. The real estate market boomed beyond
anything anyone had ever seen. And it fed itself; the more the market boomed, the more people
wanted to buy homes and the more investors were willing to lend.
A case in point: to remain relevant, FHA altered its own rules. FHA loans have always required a
down payment and prohibited the seller from making that down payment on behalf of the buyer. But
FHA altered their own rule by allowing the seller to make a "contribution" to a third party non–
profit agency, who would then provide the down payment on behalf of the buyer. And of course, the
non–profit would keep a small portion of the seller's contribution for its work as acting as the
"middleman" in the down payment transaction.
When the real estate market became saturated and values began to plateau, there was a rush to the
exit. The consumers buying homes turned out to be speculators who could not afford to make the
payments, and they quickly defaulted. As the defaults began, they multiplied exponentially. As the
defaults multiplied, the credit default swaps began to kick in. As the credit default swaps began to
pay out, the insurers behind these swaps began to go suffer. They began to pay out far more than
they had ever expected, and far more than they had ever earned. As the investors began to incur
losses, they began to sell their

A Research On Risk Management
Risk management is a paramount activity in order to ensure long–term survival in the banking
industry. In order to remain as a going concern JPM has put in place vigorous infrastructure to
mitigate and measure risks across the firm.
Such infrastructure includes a risk department overseen by the Firm's Chief Risk Officer (CRO) and
an asset–liability committee (ALCO) which monitors the Firm's balance sheet, liquidity risk and
interest rate risk. The primary duties of the CRO as defined by JPM (2014 Annual Report, pg. 110)
are as follows:
Establishing a comprehensive credit risk policy framework
Monitoring and managing credit risk across all portfolio segments, including transaction and line
approval
Assigning and managing credit ... Show more content on Helpwriting.net ...
Credit Risk
Define:
Credit risk is defined by JPM as "the risk of loss arising from the default of a customer, client or
counterparty (2014 annual report, pg. 110)". This fairly broad definition encompasses large
corporate clients, institutional clients and individual consumers. In addition, JPM identified that the
primary drivers of credit risk arise from (1) residential real estate, (2) credit card, (3) auto loans, (4)
business banking and (5) student lending businesses.
In order to further define the characteristics of credit risk, the firm uses methodologies such as (1) a
scored exposure rating, and (2) a risk exposure rating to estimate the likelihood of counterparty
default.
Scored Exposure
As securities are underwritten and issued to customers, they are transferred or essentially securitized
into a portfolio. Scored exposure is used a term that encompasses the scored portfolio held in
consumer and community banking (CCB). This portfolio predominantly includes residential real
estate loans, credit card loans, certain auto and business banking loans and student loans (i.e., the
loans issued by consumer bank Chase, as acquired by investment bank JPM following the
alleviation of the Glass Steagall Act). According to JPM, credit losses on their CCB loans are
measured based on "statistical analysis of credit losses over discrete periods of time and estimated
using portfolio modeling, credit scoring, credit scores, and other risk factors".

The Use of Money Market Funds as Collateral
Table of Contents
List of Figures iii
List of Tables iv
List of Abbreviation v
Abstract vii
1 Introduction 1
2 The Money Market 3
2.1 General Description of the Money Market and its Instruments 3
2.2 Participants and their Main Activities 4
2.3 Trading, Clearing and Settlement 6
2.4 Risks and Risk Mitigation 7
3 Collateral Management 9
3.1 General Description of the Collateral Management Function 9
3.2 Quality and Risks of Collateral 10
3.3 Transaction, Execution and Legal Issues 11
3.4 Valuation of Collateral 13
3.5 Users and Trends 14
4 The Role of Collateral in OTC Derivative Transactions 16

4.1 General Description of OTC Derivatives 16
4.1.1 Structure and ... Show more content on Helpwriting.net ...
Recent market developments have highlighted the 'Flight for Security ' of market participants by
means of financial collateral. While cash represents the preferred source of collateral in 82% of all
OTC derivatives transactions, it needs to be returned with interest to the collateral giver. At the same
time this creates a re–investment risk for the collateral receiver. When accepting MMFs as
collateral, collateral receivers are not exposed to any reinvestment risk because the fund offers
competitive rates of returns. Compared to their

Planning And Preparation Of A Great Plan
Introduction
In business as in life there is nothing that is definite. One would have a great plan and the will to
accomplish that plan but what if all the planning and preparation came to not because one had
forgotten to allow for one thing. Is there anything that one can do to mitigate or eliminate the one
thing that one did not see when the plan was laid out? All the best mad plans all the anticipating and
scrupulous planning one is bound to miss something that could potentially shot down ones plan.
What can one do to protect one's plans and dreams? The overwhelming answer is insurance
(Sundstrom, Gendler, & Writers, 1994).
One might say that if you planned well enough, that one would not leave anything to chance and
would have a ... Show more content on Helpwriting.net ...
This protocol of most business and organizations normally has some way to protect the whole plan
from going under because of one thing not being covered at the conception of the entire plan. This
protocol most likely includes insurance as the catch all for things that might have been over looked
at the initiation of the plans (Sundstrom, Gendler & Writers, 1994).
There is no single definition of insurance. In the course textbook by (Rejda, 2012), insurance can be
defined from the viewpoint of several disciplines, including law, economics, history, actuarial
science, risk theory, and sociology. But each possible definition will not be examined at this point.
Instead, we will examine the common elements that are typically present in any insurance plan.
However, before proceeding, a working definition of insurance one that captures the essential
characteristics of a true insurance plan must be established. After careful study, the Commission on
Insurance Terminology of the American Risk and Insurance Association has defined insurance as
follows. Insurance is the pooling of fortuitous losses by transfer of such risks to insurers, who agree
to indemnify insurances for such losses, to provide other pecuniary benefits on their occurrence, or
to render services connected with the risk. Case Analysis
Our course makes reference to many variations of the definition of insurance. This analysis

Money Monster Movie Analysis
Jaria Jalloh
Student ID:214951206
TA: Rana
Film Review
The two movies I decided to do a film review on was Money Monster and The Big Short. Money
Monster released on May 13th, 2016 was directed by Jodie Foster an award winning American
actress () . Foster has been a successful actress ever since she was young,at age 12 she received an
Oscar nomination for the film Taxi driver eventually leading to her winning a Golden Globe and
being named as one of the best actresses of her generation(). The movie Money Monster is about a
frustrated investor by the name of Kyle Budwell who lost $60,000,as a result of investing in a
company called IBIS. The company had an unexpected glitch to the system during a trading
algorithm, which led to a loss of $800 million for IBIS investors. Due to the unexpected financial
loss Kyle faces he decides to make an unexpected ... Show more content on Helpwriting.net ...
The two films made me constantly wonder and question why people work and what people work
for, if inequality is so prominent due to the lack of discipline in bosses. Note that inequality is one of
the largest problems in our world and can result into crisis.An example of inequality in the workface
is shown in both films when Gamby the CEO from Money Monster and _______ from The Big
Short decide to take advantage of investors ,in order to make a substantial amount of profit. This
particular scene reminded me of the rich canadian companies that made profits over $200 million in
2006. CEOs of these companies salary in a day would total what a full time minimum wage worker
made in a year. In The Big Short as a result of inequality a financial crisis occurs seen through the
collapse of the US economy . Whereas in Monster Money investors are faced with a job crisis since
the IBIS company is put under scrutiny and $800 million of investors money is

The Financial Meltdown Of 2008
The Lehman Brothers scandal is what many consider to be the catalyst that started the financial
meltdown of 2008. This paper is meant to look at what took place during the start of the meltdown
and what caused Lehman to fail. Who was involved? What caused one of the largest banking
institutions in history to fail? What could have been done differently? These are a few of the
questions I'd like to address in the next few pages. In the Fall of 2008 things were starting to look
bad for Lehman Brothers. Much of their investments were in the housing market which was
beginning to fall, and fall hard. On Friday September 12, Hank Paulson the US Treasury Secretary
under President George W. Bush, flew to New York for a meeting regarding ... Show more content
on Helpwriting.net ...
Fulds goals were essentially to "overtake rivals" like Goldman or Merrill who had been in the game
for a long time, using borrowed money was his solution to this. In 1994, right around when Dick
Fulds was appointed CEO, Lehman shares were valued at $4/share, by 2007 at Lehman 's peak,
shares were valued at a staggering $84/share. This massive growth was primarily attributed to
Lehman's expansion into other more complex investments, including credit default swaps. As
defined by Investopedia, "A credit default swap is a particular type of swap designed to transfer the
credit exposure of fixed income products between two or more parties. In a credit default swap, the
buyer of the swap makes payments to the swap's seller up until the maturity date of a contract. In
return, the seller agrees that, in the event that the debt issuer defaults or experiences another credit
event, the seller will pay the buyer the security's premium as well all interest payments that would
have been paid between that time and the security's maturity date." At the time this was seen as a
normal practice, but firms began to speculate with these swaps and this is what ultimately caused
many large financial firms like AIG to collapse. Risk was the name of the game and was how
Lehman began to operate under Fuld. It was believed that the firms creating these complicated risky
investments were distributing risk wide

Questions On Mortgage Backed Securities And Credit Default...
Mortgage backed securities and credit default swaps are words we often hear in reference to the
Great Recession of 2008. In this paper, I will be discussing and analyzing an analogy Tim Harford
uses to discuss the probability of buying a carton of eggs with an egg having a double–yolk to what
mortgage–backed securities and credit–default swaps meant and represented. In chapter 6 of the
updated book, The Undercover Economist, a lady named Fiona Exon is mentioned. In early 2010
she bought half a dozen eggs and discovered all 6 of them had double yolks. According to the
British Egg Information Service the chance of any given egg having two yolks is one in a thousand
and for each one of the 6 eggs you keep multiplying this probability and get a probability of one in a
quintillion (thousand raised to the power of 18). This was reported to the media and surprisingly
more people called in to report discoveries of half a dozen double yolk eggs. This event that was
known to be very rare was not really that rare. The calculation, in reality, was wrong as they had
made a wrong assumption that eggs with double yolks only come in clusters, increasing the chance
of seeing 6 double yolk eggs by a million billion fold with this simple assumption. So knowing that
there was a really high probability of ending up with half a dozens of double yolk eggs, Fiona
Exon's friendly local egg retailer came up with a clever marketing wheeze and offered a million–
pound jackpot to any customer who

History Of The Great Depression
Ⅰ – Introduction
In 2008 the world experienced one of the largest economic crisis, next to the great depression of the
1930's. The meltdown revealed the instability of the US banking system and led to the bankruptcy of
investment firm Leimen brothers, and collapse of worlds largest insurance company AIG, which
triggered a global financial crisis. International share prices tumbled, causing 30 million people to
become unemployed and doubling the US debt. It was the start of a global recession and it was not
an accident.
Ⅱ – History
After the great depression the US went 40 consecutive years without any financial crisis. All US
banks were tightly regulated; investment firms and banks were privately owned. In investment
firms, the ... Show more content on Helpwriting.net ...
The more stocks an investor sold, the higher the bonus or commission. The salaries on wall street
tripled. In 1981 president Ronald Regan, supported by lobbyists and analysts, started a 30 year
period of deregulation.
In 1982 the Regan party deregulated savings and loan companies which allowed them to make risky
investments with depositors money. In the late 1990's the creation of derivatives occurred, which
actually just increased the markets instability.
Derivatives allow brokers to gamble on virtually anything, such as the rise and fall of oil prices. By
the late 1990 deviates was a 50 trillion dollar unregulated market. Now, lenders are no longer at risk
if there is a failure to repay. In the new system, lenders issue loans. These loans are then sold to
investment banks. The investment banks compile thousands of different loans together, such as
student loans, mortgages and credit payments together to form complex derivatives called CDO's
(Collateralized debt obligations). Investment banks then sell these CDO's to investors. These CDO's
are classified by ratings company on the risk of investing into them. The highest rating is AAA
(lowest risk, highly securitized). Investment companies were rating extremely risky investments as
AAA but held no responsibility if the CDO failed, because they claimed that their classification and
rating system was just opinions.
Ⅲ – Housing Market...
(The graph above displays years 1994–2006,

The Aig Bailout
The AIG Bailout William K. Sjostrom, Jr.∗ Abstract On February 28, 2008, American International
Group, Inc., the then largest insurance company in the United States, announced 2007 earnings of
$6.20 billion or $2.39 per share. Its stock closed that day at $50.15 per share. Less than seven
months later, however, AIG was on the verge of bankruptcy and had to be rescued by the United
States government through an $85 billion loan. Government aid has since grown to $182.5 billion,
and AIG's stock recently traded at less than $1.00 per share. The Article explains why AIG, a
company with $1 trillion in assets and $95.8 billion in shareholders' equity, suddenly collapsed. It
then details the terms of the government bailout, explores why it was ... Show more content on
Helpwriting.net ...
Comm. on Banking, Housing & Urban Affairs, 111th Cong. 1–2 (2009) (statement of Donald L.
Kohn, Vice Chairman, Board of Governors of the Federal Reserve System) [hereinafter Kohn
Statement], available at http://banking.senate.gov/ public/_files/KohnStmtMarch52009.pdf. 2. Press
Release, American International Group, Inc., AIG Reports Full Year and Fourth Quarter 2007
Results (Feb. 28, 2008), available at http://idea.sec.gov/Archives/edgar/data/5272
/000095012308002282/y50505exv99w1.htm. 3. Yahoo! Finance, AIG: Historical Prices for
American International Group, Inc., http://finance.yahoo.com/q/hp?s=AIG (last visited Sept. 29,
2009) (on file with the Washington and Lee Law Review). THE AIG BAILOUT 945 loan.4
Government aid has since grown to $182.5 billion,5 and as recently as June 2009 AIG's stock traded
at less than $1.00 per share.6 AIG's collapse was caused largely by its $526 billion portfolio of
credit default swaps (CDSs), a type of credit derivative widely used by financial institutions but, up
until recently, largely unknown by the general public.7 AIG's troubles have been covered
extensively by the media but are difficult to comprehend fully because of the esoteric financial
instruments involved. Thus, this Article weaves explanations of CDSs, asset–backed securities,
securitization, tranching, and collateralized debt obligations into a detailed and systematic account
and analysis of

The Doomsday Machine
The Big Short– Inside the Doomsday Machine was a very informative and interesting book written
by Michael Lewis. This book was written about the genius foresight that a group of people had
about the market at the time. The market that these men decided to researched and ultimately bet
against was the housing market. Due to a lack of regulations this market was not stable and due to
greed and other factors such as negligence this market ultimately crashed. This market took many
years and poor judgment on the part of many to reach the situation it did and the subsequent crash of
2008 had world wide effects. I believe that the book was able to provide a great view into this
financial world and was able to explain how something terrible like this was able to occur. The book
looks into the lives of a few people who were not your typical investors or money managers and did
what many people of the time neglected to do was to read the bond prospectuses and project where
the market was headed. These group of financial investors were able to sort through the tranches and
truly evaluate the bonds for what they actually were. From this part of the book I learned not only ...
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In the case of the housing market collapse, all this accumulated debt had to be covered by the
government to cover the banks which were determined to be "to big to fail". After it was all said and
done the people who put the market in this situation walked away with a huge bonus. This debt is
now passed onto the general population again to repay for generations to come. History is said to
repeat itself and new policies can be yet again put into place to make this situation possible. This is
because Wall Street is driven by greed and they will do whatever they can to make a profit for
themselves and their companies without any remorse for what they do obtaining

Contagion And The Subprime Crisis
Outline essay: – Subprime crisis: causes and historical perspective – Contagion and the subprime
crisis – The case of Lehman Brothers Contagion and the subprime crisis: The literature identifies
multiple mechanisms of contagion which were possible explanations for the global spread of the
subprime crisis. Longstaff (2008) elaborates on three of these mechanisms and finds empirical
support for two of these mechanism's roles in the subprime crisis. First of all, the information
correlation view argues that contagion occurs as economic news representing negative shocks in one
market, affect values of securities in another less liquid market or market with lower price–
discovery. The second mechanism is liquidity induced contagion that occurs through a liquidity
shock affecting all markets. As investors suffering losses in one market have difficulty acquiring
funding, this results in a downward spiral of overall liquidity. Thirdly, the risk premium view of
contagion argues that severe negative shocks in one market may lead to an ... Show more content on
Helpwriting.net ...
It is argued that in the case of the subprime crisis, transmission occurred through direct linkages
(Reinhart and Rogoff 240). These direct linkages were first of all, the "nontrivial" exposure of non–
US financial institutions to the US subprime mortgage market. Secondly, there were common
characteristics in various countries at the start of the crisis. Two important ones being real estate
bubbles in many European countries, and large current account deficits in numerous countries as
varied as Bulgaria, Iceland, Ireland, Latvia, New Zealand, Spain and the United Kingdom (Reinhart
and Rogoff 244). Thirdly, various countries were not only exposed to the US subprime market, but
also had common lenders with US financial institutions (Reinhart and Rogoff

Essay on Economy: The Too Big to Fail Problem
"Too Big to fail" was first known in a 1984 Congressional hearing where Congressman Stewart
McKinney discussed the Federal Deposit Insurance Corporation's intervention with Continental
IIIinois. The idea interprates that certain financial institutions are so large, if any of them fails, it
will bring an unexpected disastrous effect to the economy. As we all known, the 2008 financial crisis
had arose the "too big to fail" problem to the peak controversial point. Banks, insurance companies,
auto companies are part of the big company industry. They make profit by creating and selling
complicated derivatives and trading loans, commodities and stocks. When the big economic
environment is prosperous, those big companies make a competitive ... Show more content on
Helpwriting.net ...
The Treasury Department purchased $40 billion in AIG preferred shares from its Capital Repurchase
Plan. The Fed will purchase $52.5 billion in mortgage–backed securities. The funds are allowing
AIG to retire its credit default swaps." The case of AIG demonstrates a specific illustration of the
"too big to fail" problem. However, after five years of the financial crisis happened in 2008, is the
"too big to fail" problem being solved or controlled? Jim Puzzanghera who published his article on
Los Angeles Times insists that banks considered too big to fail are even bigger now. Puzzanghera
provides his opinion based on the data he collected, "Just before the financial crisis hit, Wells Fargo
& Co. had $609 billion in assets. Now it has $1.4 trillion. Bank of America Corp. had $1.7 trillion in
assets. That's up to $2.1 trillion." Puzzanghera explores that one main concern of coming out with a
solution to this "too big to fail" problem is that Democrats and Republicans rarely reach an
agreement on the problem. Most Democrats are willing for the federal authority to seize the power
and to get rid of the firms if they are too big to fail while most Republicans do not want to force the
banks to shrink. In stead of regulating those big financial firms, "the government's new power to
seize large financial firms teetering near collapse could result in them being rescued instead of shut
down, in effect enshrining

Enterprise Risk Management ( Erm )
Enterprise Risk Management (ERM) is the ability to identify, manage and/or mitigate risks that can
affect the overall business operations down to the day to day operations of an organization
(Hampton, J., 2009). The overall Enterprise Risk Management (ERM) entails the utilization of a
holistic model to identify risks that face an organization. ERM is not successful when it is managed
in silos. Doing so could lead to the organization not having a clear understanding of risks and a
misunderstanding of their risk appetite. There are many important components involved in the
overall ERM process. Therefore, ERM can be implemented through creating a risk –aware culture,
the implementation of the Risk Focused Allocation Framework (RFRAF) and an operations review
which creates and implements a risk strategy for an organization. The overall framework of ERM is
dependent on a risk–aware culture. A strong culture is one in which decisions are made in a
disciplined way, taking into account considerations of risk and reward on an informed basis (Fraser,
2010, pg. 87). Each organization is different and the structure of how it is run, what is important,
and what is expected are all different. The definition of risk "is the potential to lose something worth
value" (Risk, 2014). The culture at an organization must be aware of the risk appetite, allowing
managers and other employees to make informed decisions based on the amount of risks the
organization is willing to take. Having a

Derivative Financial Instruments Employed For Risk Management
Derivative Financial Instruments Employed for Risk Management
Credit Risk
Derivatives may be traded either via an exchange (exchange traded) or alternatively, privately
negotiated contracts, which are generally alluded to as Over The Counter (OTC) derivatives.
Exchange traded and OTC–cleared derivative contracts have downgraded Macquarie's credit risk as
their counterparty is a clearing house, accountable for the handling of risk management for their
members to guarantee that the clearing house has sufficient resources to carry out its upcoming
obligations. Members are instructed to produce initial margins in agreement with the exchange rules
in the form of cash or securities, and further present daily variation margins in cash to cover
adjustments in values of the market. Macquarie has exchange traded derivatives with positive
replacement values as at 31 March 2016 of $1,794 million, whereas as at 31 March 2016 of $4,641
million.
For OTC derivative contracts, Macquarie commonly has master netting agreements (usually ISDA
Master Agreements) with specific counterparties to handle and control the credit risk associated. The
credit risk connected with positive replacement value contracts is condensed by master netting
arrangements that in an occurrence of default necessitates that balances with a certain counterparty
covered by the agreement (for example derivatives and cash margins) to be discontinued and settled
on a net basis. Macquarie frequently executes a Credit

The Big Short ' Is A Financial Crisis Movie Directed By...
"The big short" is a financial crisis movie directed by Adam McKay and released in 2015. It bases
on a truth story that some smart investors bet against the United State mortgage market in 2006 to
2008. Michael Burry, an eccentric hedge fund manager, discovered with his own research that the
United State housing market was a bubble about to burst within in a couple years. He started to bet
against the United State mortgage backed securities market by convincing some large banks to
create a credit default swap market, which was kind of a bond insurance police, and he invested
about $1,3 billion in the credit default swap market. If he was right about the market collapse, his
fund would bust up very high and make a hug profit. On the other hand, his fund would be gone if
the market stay stable.
Through Michael Burry's idea and action, the banker Jared Vennett who worked at Deutschebank
quickly learned and understood that Burry's predictions was likely true, and he made himself an
opportunity of earning fees on selling those credit default swap to the firms, which the firms could
earn profit when the underlying mortgage bonds fail. He came to Mark Baum office and tried to
convince him to buy credit default swaps. His explanation about the market collapse would being
more perpetuated by the packaging of subprime loans into collateralized debt obligations (CDOs).
Through Vennett's convincing, Mark Baum and his associated started to investigate the Miami
housing market. He first

Dealing With Predatory Home Mortgages
It is no secret that tens of millions of homeowners got into trouble with predatory home mortgages.
Tens of millions of them have MERS–originated Mortgages. If you asked the average mortgagor on
the street if they knew what a "MERS–originated Mortgage" was, they couldn't tell you. They don't
know because they weren't told at closing that the "funds" they were receiving to buy their
(generally over–appraised) home may NOT have come from the source named on their Mortgage or
Deed of Trust. Instead, the MERS® System was used because the borrowers' loans were securitized.
This "system" was created specifically for that purpose (to track the sale and transfer of loans
electronically, in a MERSCORP–owned database, with no regulatory oversight). You can't believe
everything you read either. Due diligence is required here.
I do not see either the federal or state governments coming out and educating homeowners on the
subject of MERS–originated mortgages and securitization. Nope. People didn't start finding out
about securitization until 2009, just after the foreclosure mess was revealed in the media. Then there
was the bailout. People didn't understand that either. People didn't understand that the banks made
some $53–trillion in credit default swap bets. In 2009, even most attorneys looking at the "bigger
picture" for the first time didn't know what credit default swaps were. Only the learned on Wall
Street knew what they were and how much money was made.
If you

Global Financial Crisis And Its Impact On Economic Policy...
Financialisation is the process in which financial institutions/markets increase in size and gain
greater influence over economic policy and outcomes (Palley, 2007).Another link to financialisation
is high degree of leverage. This is because with leverage, you can get a loan for 9/10s of the money,
so you only need a small portion, and you are able to make lots of profit. Leverage is linked to
financialisation in a sense that if it works, you get lots of profit with a working system, however if it
doesn't work, then you can lose lots of money, and in high degrees of leverage, you can be losing
lots of money by the investment not working out, and someone then has to pay off the loaned
money. In this essay, I will be analysing whether or not financialisation was the main cause of the
2008 global financial crisis, or if there were other factors involved in the great recession. I will be
arguing that financialisation was a cause of the crash, but because it was aided by other factors, it is
not the sole reason behind the collapse. The points that I will be making in my argument will be in
relation to the financial crisis in the context of financialisation, talking about market deregulation
and subprime mortgages. The second point that I will make will be about the greed of the CEOs on
Wall Street, and their irresponsibility when it comes to the money of others. The final point that I
will be making will be about the irresponsibility on behalf of the regulators, and how they

Corporate Credit And Risk Management
On the other hand, Lloyd Blankfein, the CEO of Goldman Sachs, prefers to describe credit default
swaps in terms of "risk management." He says, "Because we had this risk, because we were
accumulating positions...we have to go out ourselves and provide and source the other side of the
transactions, so that we can manage our risk." Although, that is simply a technical way of stating
that they need to get even action on both sides of the bet, just like a bookmaker; but, on Wall Street
they are known as "market makers." Luckily, there are some on Capitol Hill who are willing to
address these similarities. "You all are the house, you're the bookie. (Your clients) are booking their
bets with you. I don't know why we need to dress it up. It's a ... Show more content on
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If he can't do it, how does any investor reasonably think they can do otherwise?
With all that said, derivatives are not inherently dangerous with the proper conditions in place as
many non–financial companies buy derivatives in a responsible manner as a hedge for their business
expenses. For example, an airline can hedge against rising oil prices or a multinational
manufacturing corporation might hedge against a currency change with derivatives. In these
instances, derivatives actually reduce systemic risk. In fact, even Warren Buffett uses them to some
degree. However, it's a potentially disastrous situation when Wall Street goes far beyond simply
hedging risk and that is exactly what has happened. Moral hazard has ensued as the major banks
don't have an incentive to hedge their bets conservatively because they've been branded "too big to
fail." Thus, the unregulated credit default swap market alone had grown to $42.6 trillion by 2007,
roughly the household wealth of the U.S. It's very easy to see that even a slight fluctuation in a
market of that size can have dire consequences.
Unfortunately, the real estate market collapsed, and then the financial system, due to a few
underlying circumstances. Many people bought homes that were priced well beyond their means.
They were able to do so because several mortgage lending companies enabled them with a wink and
a nudge via various types of disreputable loans, such as "liar loans." A liar

2007-2008 Financial Crisis
The Global Financial Crisis of 2007–2008
The Global Financial Crisis 2007–2008 Economists and scholars spend years dissecting financial
markets and evaluating the causes of booms and busts. Throughout United States history there have
been multiple economic booms that were underestimated and followed by recessions. In the
situation of the 2007–2008 global financial crisis many culprits have been identified as causes, such
as loose monetary policy, credit booms, deregulation, over complexity, and greed. Since the
economic boom was solely dependent on weak policies and misconceptions, this leads me to believe
prevention was possible with adequate regulatory policy, risk assessment and clarifications for
commercial banks.
Monetary ... Show more content on Helpwriting.net ...
Generally homeowners were required to meet certain qualifications in order to borrow funds for
mortgages, also known as prime mortgages. Since the prime mortgage market had receded, lenders
were encouraged to lower their requirements for lending and began to allow subprime mortgages.
These less responsible homeowners began to default on their mortgages, which turned investment
bankers' stream of mortgage payments into empty houses. Increases in foreclosures raise the supply
of available houses, which lowers the fair market values of houses. The prime mortgage
homeowners were left with houses that were highly devalued relative to their mortgages and began
to abandon their mortgage obligations. Mortgage lenders, investment bankers, and outside investors
froze their activities, as they faced possible bankruptcy.
Regulatory/Supervisory Inadequacies Deregulation is believed to be the underlying cause of all
economic downturns, as its scope of responsibility reaches all markets. In the 1930s the United
States experienced a bank crisis that sparked a widespread distrust in the banking system and people
withdrew their money from the depository institutions overnight. The sudden retraction of the
money supply from the economy caused many banks to close and the economy to suffer. The
Banking Act of 1933, also known as the Glass–Steagall Act, was created to insure depositors'

Notes On Credit Default Swaps
Credit Default Swaps
Another financial vehicle that could be problematic was CDS (credit default swap). CDS is a
financial derivative works like insurance on securities. The underwriter is obligated to pay a pre–
determined fee to counterparty if a certain security default. In return, underwriters charge a fee as
compensation. CDS can be used to hedge against risks. However there are still some difference
between a CDS and an insurance contract.
The CDS does not require buyers to actually hold underlying assets. That means a third party can
"insure" against default risk that it would not bear the consequence at the first place. A financial
institution can act like an insurance company by selling CDSs. American International Group (AIG)
was the largest CDS underwriter during the crisis. AIG issued tons of CDSs because historical
default rate on bonds were so low that issuing CDS became a cash generator. They simply collected
the premium and never though of paying out anything until the crisis hit.
Another thing that CDS is different from the insurance is that an insurance pool can be much better
diversified. For example, a car crash in Los Angeles will not increase the risk of another car crash in
New York since two events of car crash are not correlated to each other. However, as mentioned
before, when the house price bubble popped, the events of defaulting on mortgage can have high
correlations. When millions of mortgages defaulted one after another, the institutes had

Role Of The Baby Boomers Generation Through Time
The "pig in the python" describes the role of the baby boomers generation through time. As the baby
boomers creep towards retirement age, a problem comes in being able to provide retirement services
for a large population from a comparatively smaller population of workers. The baby boomers were
a generation that defined America, contributing much to it's growth but in return created plenty of
problems that we will deal with for years to come. Baby boomers grew up in a generation that had
high hopes for the future of their country. More people mean't more education, higher levels of
income and thus more buying and spending than any previous generations in history. It was in itself,
a generational movement of people who believed they were ... Show more content on
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This effect may last for generations past the baby boomers, as social security benefits rely on taxes,
and the large amount of baby boomers have more ability than anyone to deplete these resources for
future generations. Improvements in medicine will surely increase how long the average person
lives, and it will take an increasing amount of money to anticipate these changes. At the same time,
the older a person lives, the more risk they are to needing assistance from other publicly funded
services such as caretakers, and also to provide them with the medicine they need to get by. The
financial collapse is a very complex issue rooted in multiple causes, making it hard to put into a
single sentence. However at it's core the reason for the collapse is that many investors and banks
tried to get rich by taking on assumptions about the housing market and taking on huge risks that
they didn't realize the full extent of. The beginning of the crisis is rooted in banks giving out
subprime loans to people who would have not otherwise been given these loans. The banks assumed
that these loans could be bundled and the numbers proved that they were safe investments, because
enough people would pay their loans back. Another assumption that people held was that, because
the housing market had a history of continual rise, that history would repeat itself and the value of
housing would always rise. The Efficient–Market hypothesis seemed to claim that economic bubbles
are not

An Analysis Of The Trading Of Derivatives
Kevin Cone and Madison Schaefer
Professor Nutting
Management 6
December 12, 2014
"An Analysis of Trading in Derivatives"
12 years ago, Warren Buffett warned that derivatives were "financial weapons of mass destruction"
(Lenzner). 6 years after he made this statement, derivative traders helped induce the biggest
financial crisis in America since the Great Depression. Derivatives are highly complex financial
instruments that have fundamentally changed the way we perceive finance. Trading these
derivatives has caused a financial revolution that has generated both a huge amount of potential, and
an an equally huge amount of risk. Derivatives, in a nutshell, are highly complex financial
instruments whose values are dependent on, calculated ... Show more content on Helpwriting.net ...
Because companies have the ability to swap an extensive variety of things, swaps are often
overarchingly defined as "an exchange in future cash flows" (IP). One common type of swap is an
interest rate swap. In this case, a company agrees to swap some or even all of their interest rate
payments with another company. Interest rate swaps can occur because companies with different
backgrounds and reputations will usually generate different credit ratings. These credit ratings often
correspond to differing interest rates charged by lenders. For example, an established and reliable
company may experience a high credit rating and receive a fixed interest rate, while a newer and
more opaque company may experience lower credit ratings and receive a variable interest rate.
These companies can opt to swap interest rate payments if each believes that the opposing party's
interest rate setup will eventually turn out to be more advantageous in the long–run. In effect, these
companies are utilizing a comparative advantage in order to achieve their financial goals.
Another example of a swap is a credit default swap (CDS). By selling CDS contracts, banks offer an
extremely attractive option to people who are lending money to major companies. A credit default
swap contract basically ensures a lender that a bank will financially cover all of his/her losses if
his/her lent credit were to somehow default. The bank will do this in exchange for regular payments

2.1.3Options. There Are Two Kinds Of Options In The Market,
2.1.3 Options
There are two kinds of options in the market, European options and American options. The most
common traded one is American options which can be exercised before maturity in the market. Call
options provide the holders the right to buy the underlying assets at an exercise price while put
options is the right to sell (Rad et al., 2015).
Hedgers needs to pay a direct premium when the options open in order to compensate for the
speculators. In this case, hedgers have a right to choose whether they would like to exercise the
options at maturity. As to the speculators, they are the writers of the option and they have no right
but obligation to exercise the option. They receive the premium and take the risk of the probability
of ... Show more content on Helpwriting.net ...
Price and position limits is also set here.
2.1.4 Swaps
Swap is an agreement that investors exchange cash flows at a specific time in the future. Generally,
both parties believe their exchanges are the same amount of cash flows. The most common swaps
are interest rate swap and currency swap. The transaction needs a dealer to realise and dealers get
the profits from transaction cost and the bid–ask spread of the cash flows.
Take interest rate swap as an example, the hedgers may wish to have a certain fixed interest payment
for their loans. By contrast, the speculators are more willing to take a floating interest payment
either they have the same amount of loan or not. The dealer combine these two counterparties
together and create the swap for the exchange of fixed interest rate and floating interest rate (Simons
&Horward, 2003). To the interest payment data, the hedger pays the fixed interests to the speculator
and received the floating interests according to the dealer. Then they pay the floating interests to the
cash market. In this case, they only pay the fixed interest rate as agreed before and eliminate the risk
of interest rate uncertainty. For the speculators, they pay the floating interests and receive the fixed
interests. If the floating interest rate is greater than the fixed one, then they suffer a loss, otherwise
they get the profits.
Generally, individuals and non–banking institutions are able to be the dealer which may cause
default

The Pros And Cons Of Globalization
To the average global citizen, the scope of globalization and its influence is glaringly obvious. You
notice it in the variety of foods at your local grocery store, the ease at which you are able to
communicate with your friends over the internet, the speed at which products from online shopping
reach your home, and just about everywhere else. In an economic sense, its existence is a bit more
elusive to the untrained eye– though certainly not any less present (on the contrary, the evolution of
what is known as the global economy is arguably the most significant product of modern
globalization). That is to say, the economic implications don't paint as happy a picture as some of
the more favorable facets of globalization, which is generally thought to be a positive thing (at least
from the privileged point–of–view of a Global Northerner). To the trained eye, by contrast, the ugly
face of globalization is much more apparent, and being educated in the matter strengthens one's
ability to understand and process specific examples of this; and there is no shortage of unpleasant
examples to choose from: one of the most famous being the stock market crash of 2008. The Big
Short is a film that narrates different group of people's involvement in the 2008 global financial
crisis– or more accurately, the United States housing market crash that is thought to have caused it.
Michael Burry is a hedge fund manager who, after some extensive research, finds out that the
housing market is

The Inside Job
ADMAP
REVIEW OF THE MOVIE – INSIDE JOB
Rohan Rambhia | PGP–10–155
Inside Job is an exemplary recount of how administrator's role when exploited to form risky
administrative strategies by means of faulty processes lead to a crisis of the stature of the recession
of 2008. It is a comprehensive documentary which narrates the history of the collapse, not only
going into great, informative depth about the risk–based strategies that put the global economy on
the line, but looks back to the rise of the financial industry. The biggest question which the
documentary arouses is that knowing what happened, why are the miscreants not being punished?
As the director, Charles Ferguson, himself stated while receiving the Oscar, "Forgive me, I ... Show
more content on Helpwriting.net ...
This resulted in inflated speculation and unethical practices by the nation's leading finance,
insurance and credit rating agencies, leading to the 2008 economic collapse. Some of the prominent
Wall Street professionals/Academicians in the Bush Government and back to the Wall Street: 2
Hank Paulson On Wall Street: Goldman Sachs CEO For the government: Secretary of Treasury
under George W. Bush Frederic Mishkin For the government: Mishkin was as a member of the
Board of Governors of the Federal Reserve under George Bush. Academia: Professor at the
Columbia Business School and coauthored a report called "Financial Stability in Iceland".
David McCormick On Wall Street: President and CEO at FreeMarkets and President of Ariba,
consultant with McKinsey & Company. For the government: Under Secretary for International
Affairs within the United States Department of the Treasury under George W. Bush
3|Page
The Obama era promised to bring in a change and also brought with it a ray of dauntless hope
failed to keep the Wall Street executives out of his Government. In fact most of the very same Wall
Street execs–turned–government administrators who pitched the U.S. into multiple financial crises
over multiple decades of unethical practices still hold high ranks in Obama's cabinet. Following

chart gives a comprehensive account of the turn of event:
ADMAP

Great Depression 2008 Essay
History has shown us again, and again that when power is left unchecked it becomes corrupt and out
of control, that is the iron law of oligarchy. In the US we saw this happen recently in the 2008
economic meltdown. The banks and corporations should never have been aloud to become "to big to
fail," and once they did grow to a point when they were there should have been more government
oversight to make sure things did not get out of hand. After the great depression laws were put in
place to try to prevent something like that from ever happening again, but we undid those
restrictions and ended up in a place eerily similar to somewhere we had been before. In this paper I
will cover a brief history of the great depression, and show how the situation in 2008 was all too
similar. I will also discuss and analyze the factors that brought us to the tipping point in our most
recent economic scare. And finally I will explain why the actions taken by the FED were necessary
and kept us from an even more ... Show more content on Helpwriting.net ...
But depressions are different, they also come around every now and again but when they come they
have the capability of toppling giants. If a huge company with thousands of employees and ties to
other large companies goes down it can easily destroy the whole system and ruin the American
economy along with the economies of many other nations. It is clear that these companies failing
can cause immense damage to an economy but it is not clear what causes these companies to fail in
the first place. Back in the depression it was fear and oversight that caused the banks to fail and in
2008 it was the same lack of oversight that allowed things to get so out of hand that the economy
was on the brink of total collapse. Luckily we learned from our mistakes in the past and the right
steps were taken to keep the economy on its

Questions On Options And Options
③ Options
Options are traded both on exchanges and in the over–the–counter market. There are two types of
option which are call option, giving the holder the right to buy the underlying asset by a certain date
for a certain price, and put option, giving the holder the right to sell the underlying asset by a certain
date for a certain price, while both the counter–parties only have obligations (usually the
speculators). Apart from that, depending on the expiration date, American options can be exercised
at any time up to the expiration date while European options can be exercised only on the maturity
itself. Because of the right that options provide to the holder to decide whether or not to exercise the
contract, there is a cost to ... Show more content on Helpwriting.net ...
And all the difference here is the reason why options require a premium.
④ Swaps
Swaps now occupy a position of central importance in over–the–counter derivatives market. The
statistics produced by the Bank for International Settlements show that about 58.5% of all over–the–
counter derivatives are interest rate swaps and a further 4% are currency swaps. A swap is an over–
the–counter agreement between two parties to exchange cash flows in the future. The agreement
defines the dates when the cash flows are to be paid and the way in which they are to be calculated.
Usually the calculation of the cash flows involves the future value of an interest rate, an exchange
rate, or other market variable. The most popular (plain vanilla) interest rate swap is one where
LIBOR is exchanged for a floating rate of interest. In this swap, one party agrees to pay the other
party interest at a fixed rate on a notional principal for a number of years. In return, it receives
interest at a floating rate on the same notional principal for the same period of time. Principal
amounts are not usually exchanged in the interest rate swap.
Take another popular swap as an interpretation for hedging and speculation, which is currency swap.
In its simplest form, this involves paying interest on a principal amount in one currency and
receiving interest on a principal in another currency.

Credit Default Swap
Credit default swap
In 2008, the financial crisis hit, which resulted some large financial institution faced the threat of
collapse as well as downturns in stock markets around the world. The credit default swap plays a
significant role in the financial crisis, especially the failure of AIG.
Credit default swap (CDS )is a financial instrument that is designed to trade credit risk that a
reference entity has credit events, and it is a credit derivate that is traded over–the–count. There are
two sides in a CDS contract –the buyer and the seller. Generally, the buyer needs to pay a periodical
premium to the seller , and in return, if the credit events occur, the seller pay the compensation to
the buyer. The credit events refer to defaults of corporations or debts. The credit default swap was
introduced in 1994 and started to be prevalent from 2001. According to the ISDA Market Survey (
2010 ), at the end of 2007, the CDS market size had increased to 62 trillion from 919 billion in
2001.
I. The risk of CDS
CDS a type of credit risk management tool, but it also introduces another dimension of risk–the
counterparty risk and systemic risk of the market ( Deutsche Bank Research 2009). The counterparty
risk is the risk coming from the default of a counterparty in the CDS. For example, if the reference
entity has the credit events, the buyer can get a payment from the seller. However, if the payment is
too large or the seller already has

The Economic Crisis ( 2008-2009 )
The Economic Crisis (2008–2009) There are numerous things that created the economic crisis
among the year of 2008–2009, which was really late and in view of it we and presumably will never
be totally recuperated from it. The main reason that it happened was because millions of Americans
couldn't pay anything off, causing disaster which will affect us Americans for the rest of our lives.
The American economy is based on utilization and consumerism. It began in 2007 when the home
loan emergency started causing home costs to increase it created chaos. The critical parts were
gluttony and misrepresentation. Some of the financial emergency reasons incorporate credit default
swaps deals were leveraged, government intercession, subprime home loans, and market insecurity.
Government Intervention In the monetary administrations part, government bailouts and corporate
mergers resulted because of the "poisonous advances" on the accounting reports of numerous
budgetary foundations. Stock costs and actually, the estimations of most securities plunged in light
of vulnerability in the money related markets. Numerous individuals experienced enormous
misfortunes in their 401(k) arrangements and different ventures and feeling the sting of these
misfortunes and apprehension about the stock exchange diminished their using. This brought about
an enormous decrease in buyer using, especially among the final quarter of 2008. The terrible
residential item GDP of the U.S. contracted

The Stock Market Of The United States
The stock market in the United States is run so anyone can view the trades, their values and no
information is hidden. Compared to the stock market, the bond market is run behind closed doors
causing problems in the economy. The difference between the two markets became more understood
during the Great Recession. When the unethical ways of individuals in the selling of bonds caused
corruption that contributed to the recession, many people were hit by the repercussions of the selfish
actions. Selling the bonds to people who weren 't in good financial situations became a normal
action which cheated many individuals out of money. The bond market would be better off being
transparent parallel to the stock market because less people would ... Show more content on
Helpwriting.net ...
While he knew what he was doing to earn money, not many other people did. His strategies to work
the market in the way that he did was disreputable. He used the possibility of failure of other people
to further himself financially. Morgan chose AIG's Cassano to sell the bonds because he worked for
"a triple–A–rated company willing to sell them" (Lewis, 70). The triple–A–rated company could sell
the triple–A–rated bonds, which were really triple–b–rated bonds grouped together to appear as a
better rating, even though the group was just a bunch of poorly rated bonds all together. When the
bonds would be sold, no knowledge of the terrible ratings had to be disclosed. If the bond market
had more regulations as to what had to be revealed, these companies wouldn 't have had the chance
to bankrupt many people and have so many people default their payments due to the awful loans the
banks were providing. AIG was selling the packaged credit default swaps (CDS) left and right.
Banks and hedge funds were buying them from not only AIG but other banks and hedge funds who
would package them again and sell them over and over. AIG was the only firm that was not buying
the packaged loans, only selling them. These people who were selling the packaged CDS' didn 't
know the damage they were doing to themselves and others. They were selling bonds to people who
they knew would default, which gave them worst

Aig and the Financial Crisis
AIG and the Financial Crisis In 2008 United States of America suffered a massive financial crisis.
The entire economy was affected, and a lot companies were forced into bankruptcy. AIG was on the
verge of being bankrupt until the government decided to bailout the company. Now the AIG is being
controlled by the government to restructure and recover assets. According to Kathy Gill about 80
percent of the AIG is controlled by the government (Gill). There are many reasons that lead to the
fall of one of the largest insurance company in America, but the four that stand out the most are
leverage provided by the government, the creation of Collateral Debt Obligations (CDO), the use of
Credit Default Swaps (CDS), the arrogance to believe nothing ... Show more content on
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Companies got to greedy and started to make CDO's out of Subprime mortgages instead of prime
mortgages. The difference between prime mortgage and subprime mortgage is the risk involved.
Subprime mortgages are the riskier security, and when the companies couldn't find any prime
mortgage they turned to the subprime mortgages. This greed lead to the fall of AIG, because of the
risky CDO's that AIG was involved with. Since the CDO's defaulted AIG had to provide companies
money for the insurance they guaranteed on those CDO's. With tons of these CDO's failing all the
companies started to perform poorly too, and eventually the financial crisis had started to take a toll
on the economy. How did Credit Default Swaps work? The insurance that AIG provided was one of
the main problems that lead to the company's destruction. Credit Default Swaps (CDS's) were
insurances for the CDO's that other companies owned. It's humorous when looking at the description
of Credit Default Swaps (CDS's) because it does not make sense since it means insurance for the
debt you own. CDS's were created by a group of bankers from JP Morgan in 1994 on a trip to
Florida (Philips). They were trying to come up with a plan where they can lessen the risk for the
loans they give out. According to Matthew Phillips JP Morgan ... "built up a "swaps" desk in mid–
90s and hired young math and science grads from schools like MIT and Cambridge to create a
market for a complex instrument. (Philips)"

Financial Crisis In Michael Lewis The Big Short
On March 10, 2010, Michael Lewis published The Big Short, a book divulging into how a small
group of investors predicted financial crisis in 2008 and benefited off of what many people over
looked. Lewis explained that these investors realized that the banks were giving out crazy mortgage
rates and loans which people wouldn't be able to pay back. After this epiphany, they came to the
conclusion that it would only be a matter of time before the poorer people getting worse deals would
default, causing a chain reaction and subsequently bringing down the entire American housing
market and economy. In order to make money they purchased CDSs – credit default swaps – as a
way to bet against the housing market and after a lot of patience, received a hefty return on what
many thought was a crazy investment. As aforementioned, the author of The Big Short is Michael
Lewis, an experienced, well renown writer who has published multiple New York Times bestselling
books on countless different subjects spanning from global finance to athlete narratives like The
Blind Side. When it comes to writing about finance and the volatile market place, there is no one
more credible than Michael Lewis. Born to J. Thomas Lewis, a successful corporate lawyer, Michael
Lewis was given almost every ... Show more content on Helpwriting.net ...
By looking at each investors situation through a narrative on their lives during the four years
preceding the crash, Lewis gave the reader an in depth view on each investor's every move, allowing
them to get a stronger understanding for why they did so. One thing that I thought would have been
beneficial would be if he explained how banks and companies have learned from this traumatic
mistake and have worked to ensure it will not happen again. Besides that, the book was almost
perfect and has inspired me to learn more about the topic

Essay on The Financial Crisis and UK Bank Scandals
The Financial Crisis and UK Bank Scandals
In September 2007 the UK banking industry began exhibiting symptoms of the financial crisis that
started in America in 2006. Northern Rock was in trouble and had to ask the Bank of England for
help. When news of this got out customers started queuing around the block to withdraw their
money. In 2008 Northern Rock was nationalised, and in 2012 it was bought by Virgin Money.
Today the banking industry can be seen to be on the road to recovery. But on that road there have
been potholes of controversy. I'm thinking Libor, excessive bonuses, payment protection mis–selling
and foreign exchange manipulation, to name a few.
But before we look at those in a bit more detail, let's quickly recap on the ... Show more content on
Helpwriting.net ...
The sellers of these swaps then covered themselves against the risk of the swap they'd just sold by
buying yet another credit default swap. It was getting complex. When mortgage defaults caused a
drop in the value of collateralized mortgage obligations, the credit default swaps had to pay up, and
banks started seeing significant losses. The reduced liquidity led to a freeze in trading of CMO's,
then the banks stopped lending to each other altogether.
Enter Northern Rock, who needed this short term lending to maintain business as usual. We know
what happened to them subsequently. Banks all over the world were suffering losses by this stage,
and headlines were made when US bank Bear Stearns had to go to the Federal Reserve for funding.
They were taken over by JP Morgan shortly afterwards. Then the floodgates opened, with the
bankruptcy of Lehman Brothers in 2008 prompting a consolidation of banks (Lloyds bought HBOS,
Bank of America bought Merrill Lynch). The whole financial system was under such a strain at this
point that government intervention was required.
The UK government propped up Lloyds/HBOS and RBS with around £37 billion of taxpayer's
money. Interest rates were cut from 5% in September 2008, and by March 2009 they were at 0.5%.
At the same time guarantees were given to savers that their deposits up to £50,000 would be covered
(now £85,000). In 2009 further government support was needed, and according to The

The Effects Of Exposure Levels On The Group 's Exposure
Scenario Analysis is the same as stress testing which capture the Group's exposure to unlikely but
plausible events. Many different scenarios are run, in order to account for significant movements in
credit spreads, interest rates, commodity prices, and exchange rates.
Citi performs stress testing on a regular basis to estimate the impact of extreme market movements.
It is performed on individual positions and trading portfolios, as well as in aggregate inclusive of
multiple trading portfolios. Citi's independent market risk management organization, after
consultations with the businesses, develops both systemic and specific stress scenarios, reviews the
output of periodic stress testing exercises, and uses the information to assess the ongoing
appropriateness of exposure levels and limits.
FACTOR SENSITIVITY
Factor sensitivities are defined as the change in market factors affecting a current position, like the
Treasury, by a single basis point. Citi practices calculating, monitoring and limiting all factor
sensitivities across their entire material risk portfolio. Essentially, the factor sensitivities take the
single basis point exposure and ensure that these levels are monitored across the firm. This appears
to be a manual process of which requires a large amount of time to keep up with. I also question the
usefulness of such a calculation.
In addition, the firm claims that these measurements are used to assess the amount of interest rate
swaps that must be

Master Thesis On Finance And Investments
Master Thesis Topics
Finance & Investments
2009–2010
Table of Contents
Master Thesis topic 1: The Design of Lockup Contracts in IPO Firms in Europe 4 Master Thesis
topic 2: Bank Risk Management 6 Master Thesis topic 3: The Ambiguous Role of Credit Ratings 8
Master Thesis topic 4: Mergers and Acquisitions 9 Master Thesis topic 5: Trading Volume and Asset
Prices 10 Master Thesis topic 6: Liquidity in Asset Markets 11 Master Thesis topic 7: The Role of
Corporate Governance in Mergers and Acquisitions 13 Master Thesis topic 8: The Risk of Corporate
Fraud and Capital Market Consequences 15 Master Thesis topic 9: Credit Derivatives 16 Master
Thesis topic 10: Bank–Borrower Relationships 17 Master Thesis topic 11: The Impact of ... Show
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As directors assume important leadership roles and they are more informed than other shareholders,
thus the information asymmetry tends to be higher between directors and outside investors than
between venture capitalists and outside investors. However, venture capitalists are repeat investors
who have valuable reputation at stake which may limit their conflict of interests with outside
investors acquiring shares in the IPO. Outside investors may not purchase shares in the IPO backed
by venture capitalists who were previously involved in taking advantage of insider information and
reducing the wealth of outsider investors. Besides venture capitalists also use IPO as an exit
mechanism to optimally recycle investments and maximize future returns. Hence the length and
expiry of directors' lockup agreements will convey significantly different information than the
length and expiry of venture capitalists' lockup agreements.
Important Literatures
Aggarwal, R., Krigman, L. and Womack, K., 2002, "Strategic IPO Underpricing, Information
Momentum, and Lockup Expiration Selling". Journal of Financial Economics 66, 105 – 137.
Brav, A. and Gompers, P., 2003, "The Role of Lockups in Initial Public Offerings". The Review of
Financial Studies 16, 1 – 29.
Cornell, B. and Sirri, E., 1992, "The Reaction of Investors and Stock Prices to Insider Trading". The

Journal of Finance 47, 1031 – 1059.
Field, L. and Hanka, G., 2001, "The Expiration of IPO Share Lockups". The Journal of

Michael Lewis The Big Short: Inside The Doomsday Machine
INTRODUCTION
The capitalist and the not capitalism or communism are the 2 types of economic system. The
capitalist is a free market that gives a freedom to people to be wealthier without any help, however,
the noncapitalist is a government rule the people and people don't have freedom. To be successful in
life people should take a risk by betting or investing mortgages, investments, funds, or other
products. The non–fiction book name The Big Short: Inside the Doomsday Machine is written by
Michael Lewis is about the subprime of mortgage and bond, and the work o f people like, Bear
Stearns, Deutsche bank and Steve Eisman of front point partner believes that the housing bubble
will be break apart and the wall will be in debt. However, the ... Show more content on
Helpwriting.net ...
If individuals or countries are left unrestricted to pursue their own self–interest that will have an
incentive to specialize to comparative advantage thus making themselves and other better off. More
commonly it referred as the advantage of a policy of Laisse Faire, benefits of a free market,
allowing the unrestricted exchange, and it is a capitalist market–based solution. The government
leaves people free to choose and it is the best for economic policy of wealth creation because are
unrestricted so that they can create more money and become rich. It describes to The Big Short:
Inside the Doomsday Machine book because the author writes about capitalist economic which is
free market and people can be rich on their own without any political power to help people and it
gives an example of people who were free and became wealthy. In fact, the policy or system which
increases the wealth is because of a do–nothing policy rule. This policy also referred to as a free
market policy, capitalism, and letting the market to operate. Also, the do–nothing policy is
capitalism and has two ways to get people to comparative advantage and exchange. First leaving
people free to pursue their self–interest as they define it maximum freedom, which leaves people
alone, not influences people's values and does not try to help people what is good or bad they choose
so it will lead to specialization according to comparative advantage and exchange. Finally, the
united states political system is uniquely configuring to favor of the "Do–Nothing Policy" and this is
why the united states excel at wealth creation and equality. Also, the Big Short is the story of how in
a free market capitalist system people become rich by taking an in their

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