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| Author: | Gorton, G. |
| Title: | The subprime panic |
| Journal: | European Financial Management
2009 : JAN, VOL. 15:1, p. 10-46 |
| Index terms: | banking credit crises securitization derivative securities mortgages USA |
| Language: | eng |
| Abstract: | Understanding the credit crisis or panic 2007 needs understanding the designs of a number of interlinked securities (henceforth as: secs.), vehicles, and derivatives (here as: ders.), which all are related to subprime mortgages. The relevant secs., ders., and vehicles are described to show: 1. how the chain of interlinked secs. was sensitive to house prices, 2. how asymmetric information was created through complexity, 3. how the risk was spread, and 4. how trade in the ABX indices linked to subprime bonds allowed information to be aggregated and revealed. The events of the 2007 crisis are described. |
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