The 2007-2008 Financial Crisis
The 2007-2008 Financial Crisis
write a 2-3 page summary in a Word document in response to the following questions:
Outline the types of new financial instruments used by companies.
Analyze the risk factors associated with each financial instrument used by companies.
How was the domestic and global economy affected by the financial crisis?
Analyze how the use of the financial instruments resulted in the need for banks to recapitalize.
Give your assessment on whether or not the new regulations put in place resulted in less risk when using the new financial instruments.
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The new financial instruments used by companies include collateralized debt obligations (CDOs), asset backed commercial paper (ABC Paper) and structured investment vehicles (SIVs). Collateralized debt obligations (CDOs) according to Buiter (2007), “is a structured financial product that pools together cash flow-generating assets and repackages this asset pool into discrete tranches that can be sold to investors.” The pooled assets may include loans, bonds and mortgages which are debt obligations. I is also important to point…
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