Did you know that buying a credit default swap can be like buying insurance on your neighbor’s car—and then getting paid when that neighbor has an accident? Learn the ABCs of CDS, and find out why they are so important to any discussion of the European debt crisis.
Increasingly, emerging markets are becoming a source of growth in the global economy. For example, foreign direct investment both into and out of these countries has shown a phenomenal increase since 2000.
To those who don't know, the term "shadow banking" probably has a negative connotation. This primer draws parallels between what has been termed the shadow banking sector and the traditional banking sector—showing that they are similar in many ways.
On a national level, the number of vacant homes is declining, as is the percentage of mortgages in serious delinquency. However, the demand for housing hasn't picked up, nor have prices.
How did poor underwriting bring about the collapse of the subprime mortgage market? More importantly, how would subprime mortgages perform if underwriting standards did not deteriorate?
As in most crises, investors turned to Treasuries in droves over the past couple of years, even as yields declined.
Hybrid adjustable rate mortgages (HARM) were designed to be refinanced by the reset date, when the interest rate would jump. These mortgages worked out well for many people who were credit risks—but only as long as housing prices continued to rise.
