- 8.8.1: What was the role of GNMA (Ginnie Mae) in the mortgage-backed secur...
- 8.8.2: Explain what is meant by (a) an ABS and (b) an ABS CDO.
- 8.8.3: What is a mezzanine tranche?
- 8.8.4: What is the waterfall in a securitization?
- 8.8.5: What are the numbers in Table 8.1 for a loss rate of (a) 12% and (b...
- 8.8.6: What is a subprime mortgage?
- 8.8.7: Why do you think the increase in house prices during the 2000 to 20...
- 8.8.8: Why did mortgage lenders frequently not check on information provid...
- 8.8.9: How were the risks in ABS CDOs misjudged by the market?
- 8.8.10: What is meant by the term agency costs? How did agency costs play a...
- 8.8.11: How is an ABS CDO created? What was the motivation to create ABS CDOs?
- 8.8.12: Explain the impact of an increase in default correlation on the ris...
- 8.8.13: Explain why the AAA-rated tranche of an ABS CDO is more risky than ...
- 8.8.14: Explain why the end-of-year bonus is sometimes referred to as short...
- 8.8.15: Add rows in Table 8.1 corresponding to losses on the underlying ass...
- 8.8.16: Suppose that the principal assigned to the senior, mezzanine, and e...
- 8.8.17: Resecuritization was a badly flawed idea. AAA tranches created from...
- 8.8.18: Suppose that mezzanine tranches of the ABS CDOs, similar to those i...
- 8.8.19: Investigate what happens as the width of the mezzanine tranche of t...
- 8.8.20: Suppose that the structure in Figure 8.1 is created in 2000 and las...
Solutions for Chapter 8: Securitization and the Credit Crisis of 2007
Full solutions for Options, Futures, and Other Derivatives | 9th Edition
a person who is performing an act for another person, called the principal
constant returns to scale
the property whereby long-run average total cost stays the same as the quantity of output changes
cross-price elasticity of demand
a measure of how much the quantity demanded of one good responds to a change in the price of another good, computed as the percentage change in quantity demanded of the first good divided by the percentage change in price of the second good
diminishing marginal product
the property whereby the marginal product of an input declines as the quantity of the input increases
the price that balances quantity supplied and quantity demanded
costs that do not vary with the quantity of output produced
the study of how people behave in strategic situations
transfers to the poor given in the form of goods and services rather than cash
the use of borrowed money to supplement existing funds for purposes of investment
the regular pattern of income variation over a person’s life
marginal product of labor
the increase in the amount of output from an additional unit of labor
a market structure in which many firms sell products that are similar but not identical
negative income tax
a tax system that collects revenue from high-income households and gives subsidies to lowincome households
the income that households have left after paying for taxes and consumption
the quantity of goods and services produced from each unit of labor input
a tax for which highincome taxpayers pay a smaller fraction of their income than do low-income taxpayers
a table that shows the relationship between the price of a good and the quantity supplied
the market value of the inputs a firm uses in production
the political philosophy according to which the government should choose policies to maximize the total utility of everyone in society
the idea that taxpayers with a greater ability to pay taxes should pay larger amounts