the theory of how the financial s c aaa- a s...

Last paid Higher yield Lower yield First paid Pools Mortgage defaults AAA AA A BBB BB- unrated RMBS RMBS RMBS RMBS RMBS RMBS CDO RMBS CDO CDO CDO CDO CDO 2 4x RMBS tranches CDO tranches AAA AA A BBB BB- unrated AAA AA BBB Unrated A 4 5 worked as long as mortgages all over the country and of all different characteristics didn't default all at once. When homeowners all over the country defaulted, there was not enough money to pay off all the mortgage-related securities. Higher-rated bonds are the �irst paid each month, so they are safer. But lower-rated bonds have the potential to earn more. RMBS payment structure Collateralized Debt Obligations (CDOs) were created by taking the lower-rated tranches out of the MBSs and repackaging them. Most of this CDO is highly rated, even though it is built out of high-risk assets. Source: IMF, Global Financial Stability Report: Containing Systemic Risks and Restoring Financial Soundness, April 2008. RESIDENTIAL MORTGAGE PAYMENTS RESIDENTIAL MORTGAGE PAYMENTS THE THEORY OF HOW THE FINANCIAL SYSTEM CREATED AAA-RATED ASSETS OUT OF SUBPRIME MORTGAGES In the �inancial system, AAA-rated assets are the most valuable because they are the safest for investors and the easiest to sell. Financial institutions packaged and re-packaged securities built on high-risk subprime mortgages to create AAA-rated assets. The system People all over the country take out mortgages. Financial institutions group hundreds of subprime mortgages into Mortgage Backed Securities (MBSs). The mortgage payments are collected by a �inancial institution and payments distributed to bond holders. Higher rated tranches are paid �irst. When monthly mortgage payments are not made, payments may not reach holders of lower-rated tranches. The securities are grouped into tranches by levels of risk and earnings potential for bond holders. When everybody can pay their mortgage in full each month, each group of bond holders gets paid. 1 2 3 Another �inancial institution does the same thing with high-risk tranches of CDOs, creating a CDO-squared.

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Page 1: THE THEORY OF HOW THE FINANCIAL S C AAA- A S Mfcic.law.stanford.edu/img/2010-0602-aaa-assets-chart.pdfTHE THEORY OF HOW THE FINANCIAL SYSTEM CREATED AAA-RATED ASSETS OUT OF SUBPRIME

Last paid

Higheryield

Lower yield

First paid

Pools

Mortgagedefaults

AAA

BBBBB-unrated

RMBS RMBS RMBS RMBS RMBS RMBS

CDO

RMBS

CDO CDO CDO CDO

CDO24x

RMBStranches

CDOtranches

AAA

BBB

BB-unrated

AAA

BBB

Unrated

worked as long as mortgages all over the country and of all different characteristics didn't default all at once. When homeowners all over the country defaulted, there was not enough money to pay off all the mortgage-related securities.

Higher-rated bonds are the �irst paid each month, so they are safer. But lower-rated bonds have the potential to earn more.

RMBS payment structure

Collateralized Debt Obligations (CDOs) were created by taking the lower-rated tranches out of the MBSs and repackaging them. Most of this CDO is highly rated, even though it is built out of high-risk assets.Source: IMF, Global Financial Stability Report: Containing Systemic Risks

and Restoring Financial Soundness, April 2008.

RESIDENTIAL MORTGAGE PAYMENTS

THE THEORY OF HOW THE FINANCIAL SYSTEM CREATED AAA-RATED ASSETS OUT OF SUBPRIME MORTGAGESIn the �inancial system, AAA-rated assets are the most valuable because they are the safest for investors and the easiest to sell. Financial institutions packaged and re-packaged securities built on high-risk subprime mortgages to create AAA-rated assets. The system

People all over the country take out mortgages. Financial institutions group hundreds of subprime mortgages into Mortgage Backed Securities (MBSs).

The mortgage payments are collected by a �inancial institution and payments distributed to bond holders. Higher rated tranches are paid �irst. When monthly mortgage payments are not made, payments may not reach holders of lower-rated tranches.

The securities are grouped into tranches by levels of risk and earnings potential for bond holders. When everybody can pay their mortgage in full each month, each group of bond holders gets paid.

Another �inancial institution does the same thing with high-risk tranches of CDOs, creating a CDO-squared.

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ФОРМАТ НАЛОГОВОЙ ДЕКЛАРАЦИИ ПО НАЛОГУ НА …aaa-investmentsllc.com/assets/files/services/fin... · НАЛОГОВОЙ ДЕКЛАРАЦИИ ПО

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