Assume that you recently finished your second-year studies in the corporate mana
ID: 2820834 • Letter: A
Question
Assume that you recently finished your second-year studies in the corporate management field and have just reported to work as an investment strategist at the brokerage firm of Darwin Entertainment Services (DES). One of the firm’s clients is Karen Diet, a professional designer who has just come to the Australia from Europe. Karen Diet celebrated her 26th birthday with a lotto ticket that turned out to be a gift worth millions of dollars. She would like to start a company to produce and market apparel she designs for the entertainment industry and later invest in real estate. Diet has overheard that in real estate investments, mortgage securitisation could have a negative impact to the financial market. Your boss has developed the following set of questions you must answer (task for this assessment item) to explain the financial system to Karen Diet before she signs a contract with DES. The structure of the report should be appropriate to your audience, include an executive summary and address each of the following questions:
Question
Demonstrate to Karen Diet how mortgage securitisation has contributed to the global economic crisis.
Explanation / Answer
Mortgage securitisation is pooling of mortgage loans together and creating financial instruments which can be sold in seconadary market. There is saying in sanskrit "Excess of anything is Harmful".
Thats what happened in 2008 Crisis.Banks wrapped up Sub Prime asset and securitized them with Agency.The sub prime assets balooned up and when it was no longer to possible to wrap it up, Baloon bursted and caused recession.If securitisation was checked it would have avoided.