FINA 3000 Lecture Notes - Lecture 11: Sears, Subprime Lending, Credit Risk
Document Summary
Boom in housing market (increase housing prices, increase speculation) Sub-prime lending: loaning money to high credit risk individuals (many of these loans went to consumers with questionable ability to repay loan) These mortgages were all deemed (cid:498)aaa(cid:499) collapsed banks. Call aka (cid:498)long(cid:499): right to buy at a set price, often used in employment (cid:523)good for. Put aka (cid:498)short(cid:499): right to sell at a certain price (cid:523)decrease think prices(cid:524) )nvestors bought (cid:498)shorts(cid:499) on housing market, which eventually. This rating made investors overpay plus overinvest. Right to buy or sell an asset at a certain price compensation) Ex: wells fargo asked employees to generate (cid:498)fake(cid:499) accounts, they got busted and stock. Destroyed wealth (stock price took a hit) for institutional investors. These two groups are suing for billion. Damaged reputation with (cid:498)green(cid:499) customer price fell but ceo still made money in stock options. Ex: volkswagen was caught faking emission test reults.
