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FINM7405 Individual Assignment
Weighting: 15%
Type: Individual
1. Why did AIG need to be bailed out by the US government? Describe how they were
bailed out. What was the rationale given by the US government as to why they were
bailed out? (500 Words)
In this question you will need to do some research into the types of transactions that
AIG made, their reason for making those trades and evaluate how that affected their
performance in the recession. Your main sources here will most likely be news media
from reputable sources.
2. Why did Lehman Brothers go bankrupt? Why do you think they were not bailed out
by the US government? (500 Words)
Like the first question, you will need to look into the decisions that the company made
going back to the early 2000s and perhaps before. However, here you will most likely
need to provide some explanation of the securitisation process and how it contributed
to the bankruptcy of the company. Here your main sources will be reputable news
media but also may require some reference to academic sources in explaining
securitisation.
3. What was the role of credit ratings agencies in the crisis? What changes did the
credit rating agencies make after the financial crisis? Do you think these changes are
sufficient to avoid another financial crisis. (500 Words)
Many mortgage backed securities were rated at AAA but contained a lot of loans of
sub prime quality. Did the agencies make a mistake? Was it deliberate? How did this
contribute to the crisis? News sources will be good references here, however, you will
also need to look into some academic sources to explain mortgage backed securities
and the credit ratings process.
4. Do you think credit default swaps are a positive thing for the market/society?
Why/why not? In your answer go over the reasons for and against CDS and then
give your opinion on if they are beneficial or not. (500 Words)
In class we went over some arguments for and against CDS. It is now your job to go
into more detail and make an argument for or against the legality of CDS. In your
answer you will have discuss their effect on the market and subsequently, society.
You will need to use news sources as well as academic references here to do well.
Marking Breakdown
Each question is worth 2.5% of your grade, making 10% in total. The remaining 5%
will be divided into presentation (2.5%) and quality of sources (2.5%). This sums to
15%. Wikipedia and Investopedia are not acceptable sources. They may, however,
be good places for you to start your research.
For each question your answer will be marked on the following scale:
- Very Good: 2-2.5%
- Good: 1.5-2%
- Satisfactory: 1.25%
- Poor: 0-1.25%