- 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
changes in fiscal policy that stimulate aggregate demand when the economy goes into a recession without policymakers having to take any deliberate action
the equipment and structures used to produce goods and services
the proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own
an agreement among firms in a market about quantities to produce or prices to charge
the failure of majority rule to produce transitive preferences for society
a measure of the responsiveness of quantity demanded or quantity supplied to a change in one of its determinants
the uncompensated impact of one person’s actions on the wellbeing of a bystander
a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100
the accumulation of investments in people, such as education and on-the-job training
an increase in the overall level of prices in the economy
the political philosophy according to which the government should choose policies deemed just, as evaluated by an impartial observer behind a “veil of ignorance”
a small incremental adjustment to a plan of action
the increase in total cost that arises from an extra unit of production
marginal rate of substitution
the rate at which a consumer is willing to trade one good for another
medium of exchange
an item that buyers give to sellers when they want to purchase goods and services
a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen
the claim that unemployment eventually returns to its normal, or natural, rate, regardless of the rate of inflation
goods that are neither excludable nor rival in consumption
the amount of a good that sellers are willing and able to sell
total revenue (for a firm)
the amount a firm receives for the sale of its output
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