Structured Finance and the 2007-2008 Financial Crisis

Inhaltsangabe:Introduction:

The fundamental motive of this thesis is to locate the main catalysts that caused the 2007/2008 financial crisis, and the rationale of their unique interaction. The three primary avenues used to layout the analysis are the Structured Finance Instruments involved, the parties concerned and the channels that exacerbated the rapidity of the spread that ultimately increased the severity of the crunch.

Chapter One lays an overview of the Structured Finance Instruments prevalent in the financial spectrum, of which the main instruments that, contributed to the triggering and propagation of the financial turmoil are demonstrated and explained.

Chapter Two exemplifies the pre-cursors of the crisis which began in the sub-prime sector of the United States. The vital triggers that caused the bust of the subprime bubble are further illustrated as well.

Chapter Three examines the varying involvement of the contributing instruments to the rapid propagation and displays the connecting link between the Structured Finance Instruments and the very source of the turmoil.

Chapter Four illustrates in depth the involvement of the three vital players (the Rating Agencies, Banks and the Regulatory/Supervisory Institutions) and their effect on the propagation of the crisis.

Chapter Five analyses the two main regulatory catalysts that contributed to the crunch through Pro-cyclicality and will also examine the role and consequences of mark-to-market Fair Value Accounting and Minimum Capital Adequacy Requirements (Basel II Accord).

Chapter Six will present a post crisis status quo with recommendations and remedies for relevant counter-cyclical mechanisms. Inhaltsverzeichnis:Table of Contents:

TABLE OF CONTENTI

ABBREVIATIONSIII

LIST OF FIGURESIV

GLOSSARYVI

INTRODUCTION AND CHANNELING OF THE RESEARCH10

1.CHARACTERISTICS OF CREDIT RISK TRANSFER INSTRUMENTS11

1.1Securitization13

1.1.1Mortgage Backed Securities (MBS)16

1.1.2Asset Backed Commercial Papers (ABCP)17

1.1.3Cash Flow Collateralised Debt Obligations (CDOs)19

1.2Credit Derivatives and Hybrid Products20

1.2.1Single Name CDSs20

1.2.2Synthetic CDOs23

1.3Re-Securitization24

1.3.1ABS CDOs24

1.3.2CDO²26

2.THE PRECURSORS AND TRIGGERS OF THE CRISIS29

2.1Soft Macroeconomic Environment in the United States and the Vulnerability of Banks29

2.1.1The Soft Macroeconomic Environment29

2.1.2The Vulnerability of Banks29

2.2The Augmentation of Subprime Mortgages30

2.3Increased […]



Inhaltsangabe:Introduction:

The fundamental motive of this thesis is to locate the main catalysts that caused the 2007/2008 financial crisis, and the rationale of their unique interaction. The three primary avenues used to layout the analysis are the Structured Finance Instruments involved, the parties concerned and the channels that ...