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N1569

Financial Risk Management Workshop Topic 2

Watch The Big Short film on YouTube here before the workshop.

During the workshop you discuss the following questions:

1.   What is the difference between subprime and prime mortgages and why were subprime mortgages so prevalent in the USA in 2008?

2.   What are mortgage-backed securities (MBS) and how did they contribute to the housing bubble?

3.   How do collateralized debt obligations (CDOs) work and why did credit rating agencies not warn banks of their risk?

4.   Explain the concept of naked credit default swaps (CDS) and their use by Scion Capital in 2008

5.   How did Goldman Sachs collude with credit rating agencies to offload their credit risk from issuing CDSson their own CDOs?

Before the workshop, please use the ChatGT prompt: “ In relation to story of the film “The Big Short” followed by one of the questions above and limit the answer so that it is not too long.  For example, you could type into chatGPT:

In relation to story of the film “The Big Short” what are mortgage-backed securities (MBS) and how did they contribute to the housing bubble? Give your answer in 100 words.

Read the answers before the workshop, where they will be discussed.