Ch01 The Investment Environment.pptVIP

* * * * 1-* Rise of Systemic Risk (Ctd.) Banks had a mismatch between the maturity and liquidity of their assets and liabilities. Liabilities were short and liquid Assets were long and illiquid Constant need to refinance the asset portfolio Banks were very highly levered, giving them almost no margin of safety. 1-* Rise of Systemic Risk (Ctd.) Investors relied too much on “credit enhancement” through structured products like CDS CDS traded mostly “over the counter”, so less transparent, no posted margin requirements Opaque linkages between financial instruments and institutions 1-* The Shoe Dr