Guess who's the tutor?
I can't believe I lost my pencil case on my last day of uni! How careless can I get? Then again, must have been distracted thinking of taking Pictures with my lecturers/tutors =p
Shall withhold the pix first though. Take a guess who is the tutor =p And give reasons for it.. Apparently when I said it's obvious.. it wasn't THAT obvious to some of my friends. Haha. (reveal the answer through other pix later)
Learnt more about the subprime crisis today:
Background:
- Increasing amounts of housing loans by US banks was being packaged as Risk free securities to Investors (from US$1Trillion's worth to US$3Trillion within 30 years)
- So a rapid increase in US home prices led to a significant decline in housing affordability
- Also, the earning capability of borrowers of such housing loans was insufficient to repay the loans.
the events..
- Thus this meant that the risk of lending to these borrowers increased, and to deal with this risk, default rates (or interest @ which money was being lent at) increased, leading to a collapse in housing prices as banks took action to reclaim the houses - which in turn meant there was a surplus of houses in the market. Following the supply and demand graph, excess supply means a drop in prices. =p
- As a result, the previously mentioned 'risk free' securities are no longer risk free. The reason for the AIG (American International Group) collapse was because AIG had taken up insuring against the default of such 'risk free' securities. The amount of securities that AIG had claims on was so huge that AIG just collapsed into Bankruptcy!
- Now credit risk is at a maximum and probably still rising with volatility at elevated levels and equity market fallen from their peak (thus the many injections by all governments around the world)
The guest speaker today presenting this material was speaking so fast we all wondered if he needed to breathe! But still.. Amazing stuff =D
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