silver jewelry wholesale bangkok Reasons for the bankruptcy of Lehman Brothers

Dana

November 24, 2022 at 12:38 am

wholesale jewelry supply shows I. The financial turmoil caused by the US subprime mortgage crisis
The collapse of the Lehman brothers is inseparable from the US subprime mortgage crisis since the summer of 2007. Therefore, to analyze the problem of Lehman brothers, we must not help but mention the US subprime mortgage crisis and the recent increasing financial storm.
. The reason for the Lehman brothers themselves
1) Entering unfamiliar business, and developing too fast, the business is too concentrated
As a top investment bank Inside the traditional investment banking business (securities issuance underwriting, mergers and acquisition consultants, etc.). After entering the 1990s, with the rapid development of fixed income products and financial derivatives, the Lehman brothers also vigorously expanded the business of these fields and achieved great success. The King of Bonds ".
After 2000, the non -traditional business of real estate and credit flourished, and the Lehman brothers began to get involved in such businesses like banks on other Wall Street. This is nothing, but Lehman's expansion speed is too fast (Merrillin, Belson, Morgan Stanley, etc. also have the same problems). In recent years, the Lehman brothers have been top underwriters and bookkeepers of residential mortgage bonds and commercial real estate bonds. Even in 2007 in the real estate market, the Rayman brothers' commercial real estate bond business still increased by about 13%[2]. In this way, the systemic risk of Lehman brothers is very high. In the year when the market is in good situation, the entire market is up, the market liquidity is flooding, investors are blinded by optimism, and huge systemic risks have brought huge benefits to Lehman; but when the market collapses, it is so big System risks will inevitably have a huge negative impact.
It, the title of Lehman brothers "King of Bonds" is of course awarded it, but it also implies that its business is too concentrated in the fixed income part. In recent years, although Lehman has also made progress in other business areas (mergers and acquisitions, stock transactions), it lacks the diversification of other competitors. In contrast, Merrust Securities, which is also in trouble, can quickly replace the equity of Bloomberg and Heiyan, which it invested in the short term and replaced the urgent cash, but Lehman has no such emergency measures. In this regard, Lehman is quite similar to Belsden, which was previously acquired.
2) There are too little capital, and the leverage is too high.
The investment banks represented by Lehman are different from comprehensive banks (such as Citi, JP Morgan Chase, Bank of America, etc.). They have too little capital and the capital adequacy ratio is too low. In order to raise funds to expand their business, they have to rely on the bond market and the inter -bank borrowing market; issue bonds in the bond market to meet the needs of medium and long -term funds, and to borrow markets in banks through mortgage repurchase and other methods to meet the needs of short -term funds (overnight , 7 days, a month, etc.). Then use these funds for business and investment and earn income. After deducting the financing cost of paying, it is the return of the company's operation. That is to say, the company uses a very few own capital and a large amount of borrowing to maintain the capital needs of operation. This is the basic principle of leverage effects. The more loans, the less capital, and the greater the leverage (except for its own capital). The characteristics of the leverage effect are that when making money, the income is enlarged by leverage; but when the loss is lost, the loss is also enlarged by leverage. The leverage effect is a double -edged sword. In recent years, due to the expansion of business, various investment banks on Wall Street have increased leverage to danger.
3) There are too many bad assets held by them, and a large part of the real estate mortgage bonds held by the Lehman brothers belong to the third -level assets. As the main underwriter and book manager of Real Estate mortgage bonds on Wall Street, Lehman has left a large part of the difficulty of selling bonds on its own asset table (30% -40%). In this way, the bond rating is very high (most of them are AAA rating, and they are even considered better than U.S. Treasury bonds), so interest rates are very low, are not favored by investors, and cannot be sold. Lehman (including other investment banks) holds them by themselves, thinking that risks will be very low. But the problem is that these bonds do not have a circulating market to determine their reasonable value. Unlike stocks and other vulnerable securities, there is no way to judge profit or loss according to the market. Under such circumstances, what the holder can do is to refer to the latest products in the market, or use their own unique models to calculate the profit or loss (Mark Tomodel). However, in addition to the quality of the model itself, the accuracy of the calculation also depends on the input variables of the model (interest rate, volatility, correlation, credit base difference, etc.). Therefore, for similar products, the valuation of different financial institutions may be very different. In addition, due to the high degree of complexity of these products, everyone often relies on the rating and models provided by third parties (such as Standard Purcera) to valuation without earning carefully and detailed analysis. Finally, traders and senior management of business departments have the motivation for overestimating such products. Because the higher the product valuation (in fact, no one knows how much they are worth it) and the more products sold, the better the performance of the department, and the more bonuses they get at the end of the year. Therefore, many people often only take care of the interests in front of them, and later things in the future, they even think that it is likely to have nothing to do with themselves.
Is when the market situation is good, the problems described above are temporarily covered up. But when the crisis came, all the problems accumulated a big explosion together. Therefore, industry insiders call such assets "toxic" assets. The Lehman brothers held a third -level asset ("toxic" assets) of $ 41.3 billion in the end of the second quarter of 2008, of which a total of US $ 20.6 billion in real estate mortgage and asset mortgage bonds (after the impairment of 2.2 billion US dollars) Essence The total asset mortgage held by Lehman (a total of 72.5 billion yuan) holds a total of $ 72.5 billion.
among these holdings, the subprime parts are about $ 280 million. Residential real estate mortgage accounts for 45%of the total holding, and commercial real estate mortgage accounts for 55%[3].
This situation is different from Citi Bank and Merrill Lynch. The US subprime mortgage crisis started from the field of residential real estate, and then gradually spread to the field of commercial real estate. This is why Citibank and Merrill Lynch have gradually decreased asset impairment from the second half of last year to this year, and Lehman's impairment has gradually increased; at the peak of the storm, Lehman's asset impairment has also increased significantly.
In fact, if Lehman does not go bankrupt, if the market situation cannot be recovered, the liquidity cannot be improved, and the non -performing assets held will continue to impair sharply and bring further losses. This can be verified from the data in the table below. The following table (Table 5) lists the various types of financial products held by the Lehman brothers on the asset table of the capital market department in the second quarter of 2008 (May 31), as well as the corresponding financial products on their debt statements. It can be clearly seen that there is a large mismatch between Lehman's assets and liabilities: its assets have a large number of tertiary assets (41.3 billion), and there is almost no (340 million) in the liability statement; at the same time Level first (optimal) assets (45.6 billion) are less than half of this category (104.9 billion) in the liability statement. Not only that, with the deterioration of the market, the secondary assets and financial derivatives they hold will be greatly affected.
Here, we need to figure out why the depreciation of the third (even level) assets will be so large in the short term. Why is it called "toxic" assets? This starts with the characteristics of real estate loans in the United States. We know that the mortgaged bonds of the third and secondary levels are supported by secondary and secondary mortgages. The United States has the world's most developed mortgage market, and its types of mortgages are also diverse and diverse. Various mortgages can be mainly classified as a fixed interest rate mortgage, floating interest rate mortgage, or the combination of the two. The fixed interest rate mortgage is similar to that of my country's mortgage. The difference is that the years and the way to repay the principal are different. There are many types of interest rates, including ordinary repayment, compensation repayment, selection repayment, fixed period of repayment, two -step mortgage, conversion mortgage, etc. In recent years, some innovation varieties have been developed, such as -k, Bridge/Swing, reverse housing loan, and housing extended mortgages. In the past few years, due to the low market interest rate, the floating interest rate mortgage was more popular, and its proportion increased significantly among new loans (33%in 2004, and fell to 17%in 2007 [4]).
. The characteristic of floating interest rates is that if interest rates rise, interest repayment will increase, and even the principal will increase. At this time, many buyers could not afford interest, so they had to break the supply and the house was recovered by the bank. In addition, it is worth specifically proposed that the Home Equity Loan (Home Equity Loan). This form allows loans to purchase the first real estate person. When housing prices rose, the property is mortgaged and purchased the second real estate from bank loans. Example: If I have a down payment of 200,000, I buy the first real estate from the bank loan of 800,000. Nowadays, house prices have risen, and my house is no exception, and it has risen to 1.5 million (this increase has been conservative in the past few years). If there are 700,000 left loans at this time, then my net assets are 800,000 (150 minus 70). I can use this 800,000 consecutive set of real estate to mortgage, and go to the other 600,000 to buy the second real estate. We can see that I actually obtained 1.3 million housing loans for 200,000 self -owned assets, and obtained up to 6.5 times the leverage. Housing extension housing loans is very suitable for buyers with poor credit records. When housing prices rise, low interest rates, and good economic situation, this model cannot see problems. However, when house prices declined sharply, interest rates increased, and the economic situation deteriorated, this model quickly collapsed. Many people are not only unable to pay the mortgage, but also difficulty in paying for credit cards. It can be said that a large part of the system risks of the financial market are caused by over -borrowing from the United States. The mortgages mentioned earlier were sold to the investment bank on Wall Street in the form of real estate mortgage bonds. Investment banks either continue to sell to investors, or the temptation of benefits will be retained on their own asset tables, or packed into CDO and other sale, or then generate other financial derivatives with CDO.
It we can imagine that when house prices have dropped sharply, buyers who are unable to pay mortgages increased a lot, and the correlation increased. When the original pricing model is no longer working, the financial products supported by the real estate market will definitely go through one of the financial products. The painful and rapid depreciation process, and investment banks represented by Lehman have to continue to impair "toxic" assets. Finally, Lehman (including other investment banks) uses a large number of ABX indexes for hedging. However, the ABX index has a strong dependence on correlation, with fixed composition. When hedging risk, you must bear the basis risk risk. When the market fluctuates violently and the correlation increases, Lehman's hedge fails, causing assets and hedging two -way damage.

3 thoughts on “silver jewelry wholesale bangkok Reasons for the bankruptcy of Lehman Brothers”

Kent
November 24, 2022 at 12:38 am

wholesale rhinestone softball jewelry The real reason for the bankruptcy of the Lehman Brothers

2008 is an extraordinary one
years, which is also a lot of affairs for the global financial market. The week after the seventh anniversary of the 911 incident became the most thrilling week in the history of Wall Street. On September 15th, the fourth largest investment bank in the United States, the Lehman Brothers
If according to the Regulations on Paragraph 11 of the Bankruptcy Law, entered the bankruptcy protection procedure, which means that this 158 -year -old investment bank takes
History. The history of Lehman's growth is a microcosm of the history of modern financial finance. Its bankruptcy is a very indicator of the world's financial history
.

The history of Lehman brothers

The Lehman Brothers, established in 1850, is an international investment bank that is headquartered in New York. Brother Lehman
has established since its establishment, after the American Civil War, Two World War, Economic Depression, "9 · 11" attacks
This and one acquisition. Financial professor Roy Smith described as "cats with
19".

1994, the Lehman brothers were listed on the New York Exchange through IPO and officially became a public company. In 2000, when the 150th anniversary of the establishment of Lehman brothers, its stock price exceeded $ 100 for the first time and entered the S

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Keith
November 24, 2022 at 12:38 am

exotic costume jewelry wholesale Pay content for time limit to check for freenAnswer Hello, I am inquiring for you, please wait a moment, I will reply to you immediately ~nHello, I am glad to answer your questions. The main reasons for the bankruptcy of the Lehman brothers are the following two points: 1. The financial turmoil caused by the subprime mortgage crisis in the United States. The collapse of the Lehman brothers is inseparable from the US subprime mortgage crisis since the summer of 2007. The most fundamental reason for subprime mortgage issues and the payment crisis is that the ability to pay for sub -loan targets caused by the decline in house prices in the United States has decreased. The subprime crisis caused the re -pricing of the entire securities market, especially derivative products. 2. Reasons for Lehman brothers themselves: ① Enter the unfamiliar business, and develop too fast, and the business is too concentrated; ② its own capital is too small and the leverage is too high; ③ has too many bad assets held and suffers huge losses.

Log in to Reply
Dana
November 24, 2022 at 12:38 am

wholesale jewelry supply shows I. The financial turmoil caused by the US subprime mortgage crisis
The collapse of the Lehman brothers is inseparable from the US subprime mortgage crisis since the summer of 2007. Therefore, to analyze the problem of Lehman brothers, we must not help but mention the US subprime mortgage crisis and the recent increasing financial storm.
. The reason for the Lehman brothers themselves
1) Entering unfamiliar business, and developing too fast, the business is too concentrated
As a top investment bank Inside the traditional investment banking business (securities issuance underwriting, mergers and acquisition consultants, etc.). After entering the 1990s, with the rapid development of fixed income products and financial derivatives, the Lehman brothers also vigorously expanded the business of these fields and achieved great success. The King of Bonds ".
After 2000, the non -traditional business of real estate and credit flourished, and the Lehman brothers began to get involved in such businesses like banks on other Wall Street. This is nothing, but Lehman's expansion speed is too fast (Merrillin, Belson, Morgan Stanley, etc. also have the same problems). In recent years, the Lehman brothers have been top underwriters and bookkeepers of residential mortgage bonds and commercial real estate bonds. Even in 2007 in the real estate market, the Rayman brothers' commercial real estate bond business still increased by about 13%[2]. In this way, the systemic risk of Lehman brothers is very high. In the year when the market is in good situation, the entire market is up, the market liquidity is flooding, investors are blinded by optimism, and huge systemic risks have brought huge benefits to Lehman; but when the market collapses, it is so big System risks will inevitably have a huge negative impact.
It, the title of Lehman brothers "King of Bonds" is of course awarded it, but it also implies that its business is too concentrated in the fixed income part. In recent years, although Lehman has also made progress in other business areas (mergers and acquisitions, stock transactions), it lacks the diversification of other competitors. In contrast, Merrust Securities, which is also in trouble, can quickly replace the equity of Bloomberg and Heiyan, which it invested in the short term and replaced the urgent cash, but Lehman has no such emergency measures. In this regard, Lehman is quite similar to Belsden, which was previously acquired.
2) There are too little capital, and the leverage is too high.
The investment banks represented by Lehman are different from comprehensive banks (such as Citi, JP Morgan Chase, Bank of America, etc.). They have too little capital and the capital adequacy ratio is too low. In order to raise funds to expand their business, they have to rely on the bond market and the inter -bank borrowing market; issue bonds in the bond market to meet the needs of medium and long -term funds, and to borrow markets in banks through mortgage repurchase and other methods to meet the needs of short -term funds (overnight , 7 days, a month, etc.). Then use these funds for business and investment and earn income. After deducting the financing cost of paying, it is the return of the company's operation. That is to say, the company uses a very few own capital and a large amount of borrowing to maintain the capital needs of operation. This is the basic principle of leverage effects. The more loans, the less capital, and the greater the leverage (except for its own capital). The characteristics of the leverage effect are that when making money, the income is enlarged by leverage; but when the loss is lost, the loss is also enlarged by leverage. The leverage effect is a double -edged sword. In recent years, due to the expansion of business, various investment banks on Wall Street have increased leverage to danger.
3) There are too many bad assets held by them, and a large part of the real estate mortgage bonds held by the Lehman brothers belong to the third -level assets. As the main underwriter and book manager of Real Estate mortgage bonds on Wall Street, Lehman has left a large part of the difficulty of selling bonds on its own asset table (30% -40%). In this way, the bond rating is very high (most of them are AAA rating, and they are even considered better than U.S. Treasury bonds), so interest rates are very low, are not favored by investors, and cannot be sold. Lehman (including other investment banks) holds them by themselves, thinking that risks will be very low. But the problem is that these bonds do not have a circulating market to determine their reasonable value. Unlike stocks and other vulnerable securities, there is no way to judge profit or loss according to the market. Under such circumstances, what the holder can do is to refer to the latest products in the market, or use their own unique models to calculate the profit or loss (Mark Tomodel). However, in addition to the quality of the model itself, the accuracy of the calculation also depends on the input variables of the model (interest rate, volatility, correlation, credit base difference, etc.). Therefore, for similar products, the valuation of different financial institutions may be very different. In addition, due to the high degree of complexity of these products, everyone often relies on the rating and models provided by third parties (such as Standard Purcera) to valuation without earning carefully and detailed analysis. Finally, traders and senior management of business departments have the motivation for overestimating such products. Because the higher the product valuation (in fact, no one knows how much they are worth it) and the more products sold, the better the performance of the department, and the more bonuses they get at the end of the year. Therefore, many people often only take care of the interests in front of them, and later things in the future, they even think that it is likely to have nothing to do with themselves.
Is when the market situation is good, the problems described above are temporarily covered up. But when the crisis came, all the problems accumulated a big explosion together. Therefore, industry insiders call such assets "toxic" assets. The Lehman brothers held a third -level asset ("toxic" assets) of $ 41.3 billion in the end of the second quarter of 2008, of which a total of US $ 20.6 billion in real estate mortgage and asset mortgage bonds (after the impairment of 2.2 billion US dollars) Essence The total asset mortgage held by Lehman (a total of 72.5 billion yuan) holds a total of $ 72.5 billion.
among these holdings, the subprime parts are about $ 280 million. Residential real estate mortgage accounts for 45%of the total holding, and commercial real estate mortgage accounts for 55%[3].
This situation is different from Citi Bank and Merrill Lynch. The US subprime mortgage crisis started from the field of residential real estate, and then gradually spread to the field of commercial real estate. This is why Citibank and Merrill Lynch have gradually decreased asset impairment from the second half of last year to this year, and Lehman's impairment has gradually increased; at the peak of the storm, Lehman's asset impairment has also increased significantly.
In fact, if Lehman does not go bankrupt, if the market situation cannot be recovered, the liquidity cannot be improved, and the non -performing assets held will continue to impair sharply and bring further losses. This can be verified from the data in the table below. The following table (Table 5) lists the various types of financial products held by the Lehman brothers on the asset table of the capital market department in the second quarter of 2008 (May 31), as well as the corresponding financial products on their debt statements. It can be clearly seen that there is a large mismatch between Lehman's assets and liabilities: its assets have a large number of tertiary assets (41.3 billion), and there is almost no (340 million) in the liability statement; at the same time Level first (optimal) assets (45.6 billion) are less than half of this category (104.9 billion) in the liability statement. Not only that, with the deterioration of the market, the secondary assets and financial derivatives they hold will be greatly affected.
Here, we need to figure out why the depreciation of the third (even level) assets will be so large in the short term. Why is it called "toxic" assets? This starts with the characteristics of real estate loans in the United States. We know that the mortgaged bonds of the third and secondary levels are supported by secondary and secondary mortgages. The United States has the world's most developed mortgage market, and its types of mortgages are also diverse and diverse. Various mortgages can be mainly classified as a fixed interest rate mortgage, floating interest rate mortgage, or the combination of the two. The fixed interest rate mortgage is similar to that of my country's mortgage. The difference is that the years and the way to repay the principal are different. There are many types of interest rates, including ordinary repayment, compensation repayment, selection repayment, fixed period of repayment, two -step mortgage, conversion mortgage, etc. In recent years, some innovation varieties have been developed, such as -k, Bridge/Swing, reverse housing loan, and housing extended mortgages. In the past few years, due to the low market interest rate, the floating interest rate mortgage was more popular, and its proportion increased significantly among new loans (33%in 2004, and fell to 17%in 2007 [4]).
. The characteristic of floating interest rates is that if interest rates rise, interest repayment will increase, and even the principal will increase. At this time, many buyers could not afford interest, so they had to break the supply and the house was recovered by the bank. In addition, it is worth specifically proposed that the Home Equity Loan (Home Equity Loan). This form allows loans to purchase the first real estate person. When housing prices rose, the property is mortgaged and purchased the second real estate from bank loans. Example: If I have a down payment of 200,000, I buy the first real estate from the bank loan of 800,000. Nowadays, house prices have risen, and my house is no exception, and it has risen to 1.5 million (this increase has been conservative in the past few years). If there are 700,000 left loans at this time, then my net assets are 800,000 (150 minus 70). I can use this 800,000 consecutive set of real estate to mortgage, and go to the other 600,000 to buy the second real estate. We can see that I actually obtained 1.3 million housing loans for 200,000 self -owned assets, and obtained up to 6.5 times the leverage. Housing extension housing loans is very suitable for buyers with poor credit records. When housing prices rise, low interest rates, and good economic situation, this model cannot see problems. However, when house prices declined sharply, interest rates increased, and the economic situation deteriorated, this model quickly collapsed. Many people are not only unable to pay the mortgage, but also difficulty in paying for credit cards. It can be said that a large part of the system risks of the financial market are caused by over -borrowing from the United States. The mortgages mentioned earlier were sold to the investment bank on Wall Street in the form of real estate mortgage bonds. Investment banks either continue to sell to investors, or the temptation of benefits will be retained on their own asset tables, or packed into CDO and other sale, or then generate other financial derivatives with CDO.
It we can imagine that when house prices have dropped sharply, buyers who are unable to pay mortgages increased a lot, and the correlation increased. When the original pricing model is no longer working, the financial products supported by the real estate market will definitely go through one of the financial products. The painful and rapid depreciation process, and investment banks represented by Lehman have to continue to impair "toxic" assets. Finally, Lehman (including other investment banks) uses a large number of ABX indexes for hedging. However, the ABX index has a strong dependence on correlation, with fixed composition. When hedging risk, you must bear the basis risk risk. When the market fluctuates violently and the correlation increases, Lehman's hedge fails, causing assets and hedging two -way damage.

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