US Subprime Mortgage Market (B): Crisis and its Aftermath


Code : ECC0029

Year :

Industry : Banking, Insurance and Financial Services

Region : US

Teaching Note: Available

Structured Assignment : Available

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Abstract: In 2007, increased foreclosure rates in the US triggered a huge crisis - affecting the whole set of participants in subprime mortgage market. This case study - second in its series - looks into the havoc the crisis created. The focus is on how levels of intermediation, between the borrower and the investor, created huge conflicts of interest and rapid collapse of the subprime mortgage market. Sophisticated investors, including many large investment banks that have invested billions of dollars, fuel subprime mortgage market. By the end of August 2007, substantial amounts of the investors' equity capital was lost - resulting in a huge credit crisis across the world.

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Pedagogical Objectives:

The case acts as a trigger for analysing the crisis from various perspectives:

  • Microeconomics
  • Behavioural Finance
  • Derivatives and Risk Management
  • Accounting and Control
  • Working Capital Management
  • Leadership.

    Keywords : Microeconomics, Behavioural Finance, Finance Case Study, Derivatives and Risk Management, Accounting and Control, Working Capital Management, Leadership, US Subprime Mortgage Market, Financial Crisis

    Contents :
    End of Housing Market Bubble
    Rising Foreclosures
    Effect on the Participants in the Subprime Mortgage Market
    Effect on Other Capital Markets

    Case Introduction >>

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