Finanzkrise - Analysis and Reasons for the Subprime Crisis

Table of Contents

• 1 Introduction
• 2 Mortgage Backed Securities as a form of Asset Securitization
  • 2.1 Structure and involved parties
  • 2.2 Versions of loan securitization
  • 2.3 Appraisal of loan securitization of the view of credit institutions
  • 2.4 Risks of securitization
• 3 Ratings of MBS
  • 3.1 Rating process
  • 3.2 Demand-Pool-asset backing for reaching a certain rating class
• 4 Analysis and reasons for the subprime crisis
  • 4.1 Definition of "Subprime"
  • 4.2 Securitization- and US-property market
  • 4.3 Trend of interest rates in the US
  • 4.4 Property loans in the US
  • 4.5 Information asymmetries inside the securitization structures
  • 4.6 Outbreak of the crisis by interaction of individual causes

Objectives and Key Themes

This bachelor thesis aims to analyze the subprime crisis, focusing on the role of mortgage-backed securities (MBS) and the underlying securitization process. The study investigates the structural components of MBS, the rating process, and the various risks involved. It further explores the development of the US property market, interest rate trends, and lending policies that contributed to the crisis.

• Securitization of Mortgage-Backed Securities (MBS)
• The role of credit ratings in the subprime crisis
• The US housing market and its contribution to the crisis
• Interest rate trends and their impact
• Information asymmetry within securitization structures

Chapter Summaries

1 Introduction: This introductory chapter sets the stage for the thesis, providing a brief overview of the subprime crisis and outlining the structure and objectives of the research. It introduces the key concepts that will be explored in subsequent chapters, such as mortgage-backed securities and securitization. The chapter lays the groundwork for a detailed analysis of the factors contributing to the crisis.

2 Mortgage Backed Securities as a form of Asset Securitization: This chapter delves into the structure and mechanics of mortgage-backed securities (MBS) as a form of asset securitization. It explains the different types of MBS, the parties involved in the process, and various versions of loan securitization, including "true sale" versus synthetic forms and "pass-through" versus "pay-through" structures. The chapter also critically appraises the advantages and disadvantages of securitization from the perspective of credit institutions, highlighting inherent risks. This foundation is crucial for understanding the later analysis of the subprime crisis.

3 Ratings of MBS: This chapter focuses on the process of rating MBS and the crucial role these ratings played in the market. It explains the rating process itself, emphasizing how the demand for specific rating classes influenced the structure of the securities and the types of collateral used. The chapter details both internal and external credit enhancements used to achieve higher ratings, critically appraising the effectiveness of these measures. Understanding this section is key to grasping the complexities and potential flaws within the system that contributed to the crisis.

4 Analysis and reasons for the subprime crisis: This chapter constitutes the core of the thesis, providing a detailed analysis of the subprime crisis. It begins by defining "subprime" and then analyzes the interplay between securitization and the US property market, examining the origin and growth of the securitization market alongside the developments in the US housing market. The chapter further explores the influence of interest rate trends and the lending policies of banks, highlighting the impact of information asymmetries within the securitization structures. Finally, it synthesizes the individual contributing factors to show how their interaction led to the outbreak of the crisis. The chapter offers a comprehensive explanation of a complex issue, integrating prior chapters' findings into a cohesive narrative.

Keywords

Subprime crisis, mortgage-backed securities (MBS), asset securitization, credit ratings, US housing market, interest rates, lending policies, information asymmetry, risk management.

Frequently Asked Questions: Analysis of the Subprime Crisis Through Mortgage-Backed Securities

What is the main topic of this document?

This document provides a comprehensive overview and analysis of the subprime crisis, focusing on the role of mortgage-backed securities (MBS) and the underlying securitization process. It examines the structural components of MBS, the rating process, various risks involved, the US property market development, interest rate trends, and lending policies contributing to the crisis.

What are the key themes explored in the analysis?

The key themes include the securitization of MBS, the impact of credit ratings on the crisis, the role of the US housing market, the influence of interest rate trends, and the implications of information asymmetry within securitization structures.

What is the structure of the document?

The document is structured into four main chapters: an introduction, a detailed explanation of Mortgage-Backed Securities (MBS) as a form of asset securitization, an examination of the rating process for MBS, and a comprehensive analysis of the causes and development of the subprime crisis. It also includes a table of contents, objectives and key themes, chapter summaries, and keywords.

What are Mortgage-Backed Securities (MBS)?

The document defines and explains MBS as a form of asset securitization. It details their structure, the involved parties, different versions of loan securitization, and the appraisal of securitization from the perspective of credit institutions. The inherent risks associated with MBS are also discussed.

What role did credit ratings play in the subprime crisis?

The document explores the process of rating MBS, highlighting the impact of demand for specific rating classes on the structure of the securities and the collateral used. It analyzes the effectiveness of credit enhancements used to achieve higher ratings, ultimately linking these rating processes to the vulnerabilities that contributed to the crisis.

How did the US housing market contribute to the subprime crisis?

The analysis examines the interplay between securitization and the US property market, tracing the development of both and showing how their interaction led to the crisis. Factors such as lending policies and interest rate trends are considered.

What is the significance of information asymmetry in the subprime crisis?

The document highlights the role of information asymmetries within the securitization structures as a crucial contributing factor to the crisis. It explains how these asymmetries exacerbated the risks and ultimately contributed to the outbreak of the crisis.

What are the key findings of the analysis regarding the causes of the subprime crisis?

The analysis synthesizes various contributing factors, including the structure of MBS, the rating process, the US housing market boom, interest rate trends, lending policies, and information asymmetries, to present a cohesive explanation of how their interaction triggered the subprime crisis.

What keywords are associated with this analysis?

Key terms include: Subprime crisis, mortgage-backed securities (MBS), asset securitization, credit ratings, US housing market, interest rates, lending policies, information asymmetry, and risk management.