globalisation and financial crisis essay
Presentation:
Today I’m going to talk about new complex financial instruments and my topic is : The creation of complex financial instruments was a key component in the creation of the financial crisis of 2008.
My presentation has been divided into four parts. The first part I will identify new financial instruments and describe its activity. Next to The second part, the criticisms of the complex instruments will analyses. And then, the third part will discuss whether the creation of the complex financial instruments should be blamed as a cause of the global financial crisis. Finally, I will give my opinion basing on my researches.
To start with first part, I want to mention to 2 of most notable financial instruments, these are CDO and CDS. What is CDO? What is CDS? CDO is collateralized debt obligation, a type of asset backed security, and this video will clarify the formation of CDO. Along with CDO we have synthetic CDOs created by combination of CDOs with the similar method. Before global crisis, you can see the rapid increase in CDO market from around 500 bn$ in 2002 to approximately 2000 bn$ in 2006, The CDO market has become one of the most profitable markets for investment banks . That is some information of CDO.
In term of CDS, it’s different, CDS refer to credit default swap, a derivatives, agreement that the seller of the CDS will compensate the buyer in the event of a loan default or other credit event. The buyer of the CDS makes a series of payments (the CDS "fee" or "spread") to the seller and, in exchange, receives a payoff if the loan defaults. And now, you can see the enormous change in CDS market from the chart. It boomed between 2004 and 2007. The nominal value of CDS doubles continuously each year. So, that’s an overview of CDO and CDS.
2.Now, let’s move on to the Criticisms of the instrument in 2008. CDO and CDS is important link in global financial crisis and there are many criticisms about the complexity of them as a key component in
Today I’m going to talk about new complex financial instruments and my topic is : The creation of complex financial instruments was a key component in the creation of the financial crisis of 2008.
My presentation has been divided into four parts. The first part I will identify new financial instruments and describe its activity. Next to The second part, the criticisms of the complex instruments will analyses. And then, the third part will discuss whether the creation of the complex financial instruments should be blamed as a cause of the global financial crisis. Finally, I will give my opinion basing on my researches.
To start with first part, I want to mention to 2 of most notable financial instruments, these are CDO and CDS. What is CDO? What is CDS? CDO is collateralized debt obligation, a type of asset backed security, and this video will clarify the formation of CDO. Along with CDO we have synthetic CDOs created by combination of CDOs with the similar method. Before global crisis, you can see the rapid increase in CDO market from around 500 bn$ in 2002 to approximately 2000 bn$ in 2006, The CDO market has become one of the most profitable markets for investment banks . That is some information of CDO.
In term of CDS, it’s different, CDS refer to credit default swap, a derivatives, agreement that the seller of the CDS will compensate the buyer in the event of a loan default or other credit event. The buyer of the CDS makes a series of payments (the CDS "fee" or "spread") to the seller and, in exchange, receives a payoff if the loan defaults. And now, you can see the enormous change in CDS market from the chart. It boomed between 2004 and 2007. The nominal value of CDS doubles continuously each year. So, that’s an overview of CDO and CDS.
2.Now, let’s move on to the Criticisms of the instrument in 2008. CDO and CDS is important link in global financial crisis and there are many criticisms about the complexity of them as a key component in
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