Facilitating Student Understanding of the Sub-Prime
Mortgage Crisis: Systematic Risk, CDO, and Contagion
Ameeta Jaiswal-Dale
University of St. Thomas, USA
Volume 5: 2010, pp. 117-144; ABSTRACT
This paper provides instructor resource to facilitate student understanding of the defining features of what is the sub-prime mortgage
crisis, empowering the student to connect theory to practice. Successfully implemented in the classroom (Jaiswal-Dale, Lundsten 2009), the four
modules of the paper can be used independently or sequentially, adapted as lecture, readings or assignments. They cover the theory of systematic
risk; its management via derivative contracts and structured securities (CDO and CDS); shortcomings of the application of theory to practice, the
ensuing contagion, and global financial institutions in crisis; and reflections on the consequences of the crisis, ethical and economic. Answers to
why the crisis has occurred, lessons learnt, how to redress it are documented, among others, in Rajan (2009, 2010).
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