Mortgage-backed securities II
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- 9:17Mortgage-backed securities IIIby khanacademy87,364 views
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I just want to clarify, the investment bank creates new corporation/ entity? what are example of this newly created corporations?
helloworld0714 1 month ago
@tcg4111 The 2 billion dollars are cashflows over 10 years.Hence they are not comparable to 100 M made now.To understand this further go to the concept of time value of money.
01agni1 1 month ago
@tcg4111 it's just a matter of the investment banks pushing the risk off their own plates. once IB's sell all the "corporation" shares, it doesn't matter as much to the IB if people default on their mortgage payments and the corporation's cash flow dries up
kweezyyy 1 month ago
who are some of these "special purpose entities" you speak of?
rond02kg 2 months ago
The math and the model looks fun to play around with until someone defaults.
Then, a few more defaults and then there's a domino effect and everyone has a sad face now. :(
chocoboblue99 4 months ago
just got one question and hopefully you can answer it soon enough for it to help...
why does the INVESTMENT BANK (green bank) make up a corporation which sells shares letting investors bank off the interest and principle payment as well? and therefore making only 100 M (in this case), when, if they kept the rights to the mortage payments to themselves, theyd eventually be making 2 billion dollars (in this case)? provided the investmEnt bank had enough money to buy the rights from the LOCAL BANK
tcg4111 4 months ago 2
Hats off to Creater of that movies.....awesome Explanation with simple examples.......:) Thanks a lot
kannu12341 6 months ago
very clear,
great stuff :]
RebelHQ 6 months ago
Weren't securitized mortgages traded on the open market? If so, it seems strange to me that they would be since isn't there an upper limit to how much they should be able to go up? In this example, even if all the people actually pay their mortgages, they only have to pay 7% interest. Therefore, there's an upper limit on the income stream. I'm wondering if these things ever traded above their potential worth (and if so - why)
doublek321 6 months ago
where does the FNMA, GNMA, FHLMC comes into play?
prakashenator 8 months ago