What are the Collateralized debt obligations?

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A decade has gone since the 2008 financial crisis, a crisis that hit and damaged the foundations of the financial world in a way not seen since the thirties of the past century. The years before 2008 witnessed a wave of irresponsible mortgage lending in the united states of America, money was given to subprime borrowers with poor credit histories. These risky mortgages were supposedly turned into low-risk securities, by grouping large numbers of these mortgages into pools. Pooling is a financially engineered process to maximize profit and minimizing risk; pooling works when the risks of each loan are uncorrelated. Financial institution argued that the real...
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