"Options, futures and other derivative products" study notes (Chapter 8: Securitization and credit crisis in 2007)

• Foreword

  The main purpose forwards, futures, swaps, options and other derivative products is the transfer of risk from one entity to another economic system entity.

• 8.1 Securitization

  MBS mortgage loans

  Government National Housing Mortgage Association (GNMA, also known as Ginnie Mae Ginnie Mae), 1968 Nian

  Securitization allows banks lending rate far greater than the growth rate of its deposits.

  Banks did not take loans remain on the balance sheet.

  Asset-backed securities (Asset-Backed Security, ABS)

  SPV (Special Purpose Vehicle, SPV)

  Over-collateralisation (Over-Collateralization)

  Asset-backed debt securities, mortgage-backed securities (ABS CDO, Collaterialized Debt Obligation)

• 8.2 US housing market

  Adjustable Rate Mortgage (ARM, Adjustable Rate Mortgages)

  Loan to Value Ratio (Loan-to-Value Ratio)

  FICO scores

• 8.3 Where is the problem

  Regulatory arbitrage (Regulatory Arbitrage): the share of assets held by the mortgage portfolio generated the required capital is less than the mortgage itself directly hold capital needs.

  Agency costs (Agency Cost): economics of a commercial activity in the interests of two different participants are not exactly the same situation.

• 8.4 consequences of the crisis

  "Dodd - Frank Act"

  Fence

  Like Ning European Commission

  Basel Committee to develop "Basel II": developed a set clarify the bank's own credit risk must hold a number of capital rules.

• References

1. "Options, futures and other derivative products." $John C\cdot Hull$ ; Yong, I'm the cable.