The Subprime Credit Crisis of 07

Turnbull, Stuart M.; Crouhy, Michel; Jarrow, Robert A.

doi:10.2139/ssrn.1112467

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The Subprime Credit Crisis of 07

56 Pages Posted: 25 Mar 2008 Last revised: 20 Jul 2008

See all articles by Stuart M. Turnbull

Stuart M. Turnbull

University of Houston - C.T. Bauer College of Business; Queen's University

Robert A. Jarrow

Cornell University - Samuel Curtis Johnson Graduate School of Management

Date Written: 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.

Keywords: Subprime mortgages, SIVs, monolines, transparency, valuation

JEL Classification: G22, G30, G32, G38

Suggested Citation: Suggested Citation

Turnbull, Stuart M. and Crouhy, Michel and Jarrow, Robert A., The Subprime Credit Crisis of 07 (July 9, 2008). Available at SSRN: https://ssrn.com/abstract=1112467 or http://dx.doi.org/10.2139/ssrn.1112467