Links on Securitization, etc

Financial Crisis Overview:

http://www.thedeal.com/newsweekly/2008/10/chain_of_fools/print/

How subprime blew up CDOs which blew up the market.

MBS:

Fed Study:  http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1071189&rec=1&srcabs=1020396

(And for those who missed these the first time.)

Frannie:  http://calculatedrisk.blogspot.com/2007/04/mbs-for-ubernerds-i-gse-pass-throughs.html

Private Label:  http://calculatedrisk.blogspot.com/2007/04/mbs-for-ubernerds-ii-remics-dogs-tails.html

More:  http://calculatedrisk.blogspot.com/2007/05/mbs-for-ubernerds-iii-credit-risk.html

CDO’s

(another securitization that’s been causing trouble):

http://www.portfolio.com/views/blogs/market-movers/2007/12/28/explaining-cdos-overcollateralization-edition

http://calculatedrisk.blogspot.com/2007/07/leverage-ratings-and-forced-unwind.html

http://accruedint.blogspot.com/2007/03/how-does-cdo-work.html

Graphical explanation:  http://infoproc.blogspot.com/2007/12/anatomy-of-cdo.html

Mathematics of CDO rating (layman’s edition):  http://www.lrb.co.uk/v30/n09/mack01_.html

Future of CDOs:

http://accruedint.blogspot.com/2008/05/cdos-future-of-leveraged-fixed-income.html

http://theamericanscene.com/2008/12/23/ahi-quanto-a-dir-qual-era-e-cosa-dura-esta-selva-selvaggia-e-aspra-e-forte-che-nel-pensier-rinova-la-paura

Synthetic CDOs:

Basics:  http://www.portfolio.com/views/blogs/market-movers/2008/11/28/understanding-synthetics

Super Seniors:  http://www.portfolio.com/views/blogs/market-movers/2008/12/01/whats-a-super-senior-tranche

Super Senior Q&A:  http://www.portfolio.com/views/blogs/market-movers/2008/12/02/super-seniors-your-questions-answered

More:  http://ftalphaville.ft.com/blog/2008/12/02/18962/synthetic-cdos-not-saving-anything/

Liquidity & the Crisis:

Lemons:  http://worthwhile.typepad.com/worthwhile_canadian_initi/2008/12/why-did-liquidity-fall.html

Trading volume:  http://worthwhile.typepad.com/worthwhile_canadian_initi/2008/12/trading-volume-and-financial-crises.html

Aggregate demand:  http://worthwhile.typepad.com/worthwhile_canadian_initi/2009/03/liquidity-and-aggregate-demand.html

Ratings agency incompetencehttp://www.nytimes.com/2008/04/27/magazine/27Credit-t.html

…and how it made CDO blowups possible:  http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1287363 (355 KB PDF)

Update:  More on Liquidity & the Crisis:

http://worthwhile.typepad.com/worthwhile_canadian_initi/2009/03/why-does-liquidity-matter-so-much.html

Update #2:  Methinks it unlikely that this is merely a liquidity crisis.  Home prices bubbled, and generated lots of bad loans (& losses therefrom) as a result.  Many of those losses are probably “permanent”, in the sense that home prices will probably not rise to levels sufficient to make those loans “good” for years to come.  Those losses have to be borne by somebody.  While it’s possible that the magic of securitization has distributed all those losses to foreigners or non-systemically-important institutions (financial or otherwise), given banks’ non-trivial holdings of securities w/ residential RE exposure (e.g., agency & private RMBS, & CDOs backed thereby), as well as loans held in portfolio (e.g., mortgages, HEL(OC)s), it makes sense that at least some of those losses will end up w/ banks.  Aside from RE, there’s also losses in other loan areas (e.g., CRE, credit cards) that are probably inevitable given the recession.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: