"Collateralized Debt Obligation" Essays and Research Papers

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Collateralized Debt Obligation

innovations like collateralized debt obligations (CDOs) and credit default swaps (CDSs), created by greedy bankers who did not understand their own creations (e.g. McDowell 2011). Do you agree or disagree with this analysis? Give reasons for your answer. Greedy can be defined as having a strong desire to have more than you have already got. The bankers discussed in this piece, who were involved in the creation of products they knew little about, fit this definition perfectly. Collateralized debt obligations...

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What is the global financial crisis, and who is it a crisis for?

most prominent drawback is that there are too many regulatory systems and agencies in the U.S., their authorities overlap mutually, resulting in a blind spot in monitoring. For example, considering financial derivative products such as Collateralized Debt Obligation (CDO), Credit Default Swap (CDS), it is not definite about whether it is FRB, OTS or SEC, which should in the end manage them. Secondly, various regulatory principles are developed fine increasingly, in ensuring the accuracy of the regulatory...

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Importance of Derivatives

Credit Default Swap and Collateralized Debt Obligation. Credit Default Swap is considered an insurance against non-payment which generally plays as a means for transferring risk from one party to another. Collateralized Debt Obligation represents different types of debt and credit risk. These different types of debt are referred to as slices, where each slice has a different maturity and risk associated with it. The higher the risk, the more the Collateralized Debt Obligation pays. At first, everything...

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Inside Job Movie Review/Questions

to the investors not the lending banks. Additionally, the Credit Rating Agencies (CRA) gave the RMBS their highest ratings of AAA, making the RMBS appear to be safe investments. The banks then began to bundle the RMBS together into Collateralized Debt Obligations (CDO) and together with the rating agency they determined large portions of CDOs to be AAA rated, despite the fact that they were backed only by subprime mortgage loans. CDOs became highly popular and grew in numbers, however it became...

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The Giant Pool of Money

borrowers to find themselves underwater after not reading the fine print of what they were signing up for. The following reforms would mitigate social proof further: 1) ownership should be clear, so the borrower knows who owns his or her debt, 2) collateralized debt obligations should only be able to be sold by brokers who are educated on their risks by a government agency, 3) NINAs and other non-verified mortgages should be outlawed and 4) Banks and mortgage originators should invest in shorting mortgage...

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2007-2008 Financial Crisis

ownership and a booming market for mortgages. Investment bankers began to purchase individual mortgages as a means to acquire more debt leveraging to continue financing more mortgage purchases. These mortgages were grouped together with other comparable mortgages then they were reformed, rated and packaged as a marketable product known as a collateralized debt obligation (CDO). The CDOs had different levels of risk and returns based on the estimations of default probability (NY times, 2012). To...

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financial crisis 2008 and UK actions

need to know where does it start and why it become global issue. The main reason for this financial meltdown of the economy was the Collateral debt obligation and rating agencies who rate them. CDO is acronym for Collateralized debt obligation. Longstaff and Arvind (2008) describe CDO as: “financial claim to the cash flows generated by a portfolio of debt securities or, equivalently, a basket of credit default swaps (CD contracts)”. To find out the main reason for this crisis, it is important to...

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Securitization and its Role in Creating Toxic Assets

Creating Toxic Assets June 2014 Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations and selling said consolidated debt as bonds, pass-through securities, or collateralized mortgage obligation (CMOs), to various investors. The principal and interest on the debt, underlying the security, is paid back to the various investors regularly. Securities backed by mortgage receivables...

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Inside Job however, does not involve very many new terms, and explains the recent global financial crisis nicely (even though some of the opinions in the movie may seem biased). The terms Residential Mortgage Backed Securities (RMBS), and Collateralized Debt Obligations (CDO) are explained in the file “Subprime Mortgage Market and the Great Recession” available on your Moodle course page (under chapter 9). The term Credit default swap (CDS) is nicely explained in the movie “Inside Job” itself. Historically...

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Summary for Too Big to Fail

market value has fallen by 94 percent, it forcing Lehman filing for bankruptcy protection. Lehman declared bankruptcy in September 2008, a total debt of $613 billion. However, Bank of America did not leave that weekend empty handed. They changed the targets to Merrill Lynch. Merrill Lynch was the nation’s largest CDOs (Collateralized debt obligations) distributors. However, by August 2006, CDOs portfolio value has shrunk dramatically, the company appeared heavy losses. Merrill Lynch realized that...

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