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Qustion 1 only Read Attachment 3E Goldman Sachs Hawks CDOs tainted by credit crisis under new name These new products called Bespoke Tranche Opportunities (BTOs)
Qustion 1 only
Read Attachment 3E Goldman Sachs Hawks CDOs tainted by credit crisis under new name These new products called Bespoke Tranche Opportunities (BTOs) allow investors to tailor the securitization however they want, but the two key dimensions are: (1) what credit risks are included in the pool of reference entities; and (2) how the deal is structured (tranched). Banks have learnt one thing since the crisis, and that is, unfunded issues can be very problematic, and so most of these deals appear to be fully funded. -Using the information in the article and any other information you may find about BTOs (HINT: do not waste too muchtime looking, there is not much as these are too new) to answer the following.- Consider the following different parties: the borrowing firms (F), the lenders who want credit protection (L), the "speculators" (S), the intermediary i.e. Goldman Sachs (GS). and the investors who buy BTOs (I). 1,' In any given deal of this nature we know that we need at least two of the above counterparties to take part, but of course, there can be many more than two. For the following three scenarios, please draw and label a diagram of the flow of funds, risk and return from the ultimate user of funds to the BTO investor: a,' Ethical Goldman Sachs creates BTOs to hedge insurance written for clients who have credit exposures to various firmsStep by Step Solution
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