What is meant by

Subprime and Prime???

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 Mortgage Backed Securities
(MBS)
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 In finance, a mortgage-backed
security (MBS) is an asset-backed
security whose cash flows are backed
by the principal and interest
payments of a set of mortgage loans.
Payments are typically made monthly
over the lifetime of the underlying
loans.

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• At the mortgage broker’s….

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After 11th sep 2001 FED took
financial Engineering for the
development of its own people

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8%

Insurance
Investors or
Secondary
Markets……
Hedge
14 % Funds….FIIs.

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• A few weeks later at the bank

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• Let’s see what the smart guys are doing

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• CCollateralized debt obligations (CDOs) are a type of
asset-backed security and structured credit product.
CDOs are constructed from a portfolio of fixed-income
assets. These assets are divided into different tranches:
the good (rated AAA), the bad (AA to BB), and the ugly
or the fucked up on (unrated). Losses are applied in
reverse order of seniority and so junior tranches offer
higher coupons (interest rates) to compensate for the
added default risk. CDOs serve as an important funding
vehicle for fixed-income assets.

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 o n s (CD O s ) a re a type of
bt obliga ti Os are
• Collateralized de n d structured c re d it p ro d u c t. C D
s e t- b a c k e d s e c u ri ty a
e a s s e ts . T h e s e a ssets
as fo li o o f fixed-incom
constructed fr o m a p o rt
o o d (r a te d A A A ), the bad
in to d iffe re n t tr a n ches: the g n ra te d ). L osses
d iv id e d e s … (u
are
d th e u g ly o r th e fucked up on tr a n c hes offer
(AA to BB), an o rd e r of seniority a n d s o ju n io r
in re v e rs e th e a dded
are applied tes) to com p e n s a te fo r
ig h e r c o u p o n s (i n te re s t ra
fu n d in g v e h ic le fo r fixed-
h e a s a n important
C D O s s e rv
default risk.
income assets.

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• Let’s drop in to see the accountant

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• Gee we never saw it coming…

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What is ARM and

Refinancing?

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 Impact on India
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 ICICI and SBI Bank hit ----loss of billions
 Bangalore based Infosys BPO , which has lost a prime client,
Green-Point Mortgage.
 High-premium private equity (PE) and merger and acquisition
(M&A) deals are set to slow down
 Employment rate in India is decreasing. As IT and BPO sector
refrain from appointing more officials.
 Appreciating rupee makes Indian companies earn in dollars
and pay in rupees.
 Rising Inflation risks in India due to Crude oil appreciation in
the global market (US Inflation)
 Retail loans having Property and income rate growth mismatch

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The End….

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