Attract investors with different risk appetites

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Which of the following statements is most correct? a. The securitization process reduces the total amount of credit risk embedded in the underlying mortgages, attract investors with different risk appetites, and give home buyers easier access to credit. b. Each time a new security is created during the securitization process, fees are being earned by the investment banks, rating agencies and other intermediaries. c. The collapse of the MBS/CDO market in 2007-2009 was mainly the fault of greedy Wall Street firms who chased profits generated by securitizing and trading these complicated structured finance products. Home buyers, on the other hand, are innocent victims of this crisis. d. Investors in structured finance products (e.g., ABS, MBS, or CDOs) who realized huge losses in the 2007-2009 crisis understood the risks they took, but were simply fooled by the “insurance” provided by the credit default swaps (CDS) they bought. e. Rating agencies cared about their long-term reputation with their “customers” such as mutual funds and hedge funds, so they tried their best to give accurate ratings for the MBS/CDO tranches they rated.

Reference no: EM13978830

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