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The Subprime Credit Crisis of 07Stuart M. TurnbullUniversity of Houston - C.T. Bauer College of Business Michel CrouhyNatixis Robert A. JarrowCornell University - Samuel Curtis Johnson Graduate School of Management July 9, 2008 Abstract: This paper examines the different factors that have contributed to the subprime mortgage credit crisis: the search for yield enhancement, agency problems, lax underwriting standards, failure by the rating agencies to identify a changing environment, poor risk management by financial institutions, lack of transparency, the limitation of extant valuation models and the failure of regulators to understand the implications of the changing environment for the financial system. The paper addresses the different issues and offers suggestions on how to move forward.
Number of Pages in PDF File: 56 Keywords: Subprime mortgages, SIVs, monolines, transparency, valuation JEL Classification: G22, G30, G32, G38 working papers seriesDate posted: March 25, 2008 ; Last revised: July 20, 2008Suggested CitationContact Information
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