Econ Homework assignment

1. Private equity markets have grown rapidly. Provide an overview of theprivate equity market, including a discussion of the advantages and disadvantages. There is a paper “The Economics of the Private Equity Market” by Stephen D. Prowse at the Federal Reserve Bank of Dallas that provides
a nice overview. You are also welcome to look at other web sites, including Wikipedia. Answer the following questions: what is the private equity
market and how does it different from the standard equity market? What types of firms raise funds through the private equity market? Is it cheaper
to raise funds through a standard equity market or the private equity market? What kind of borrowers does this market attract? How does asymmetric information enter into the story? Which firms are the main participants in the private equity market?
You should write about a page (typed) on this topic.
2. Contingent convertible bonds (COCOS) have recently been in the news. Describe a COCO. I recommend going to the Investopedia website.
3. The Treasury has started to issue Treasury Inflation Protected bonds (TIPS). Go to the Investopedia web site or else CNN (look in the business section) to find a primer on TIPS. Provide a summary of what TIPS are, how they are structured (such as what price index is used), and other
basic information about the bond.
4. The “Shadow Banking System” is defined as hedge funds, conduits, SIV, money funds, monoline insurers, and investment banks. One explanation
for why the financial crisis of the past year was so dramatic is that there was a “bank run” on the shadow banking system. Provide a two paragraph
description of what a bank run means for the institutions in this list of “shadow banks.”
5. There is been tremendous innovation in financial instruments that make it easier to trade credit risk. The issuance of asset backed securities
(ABS), collateralized debt obligations (CDO), collateralized loan obligations
(CLO) and credit default swaps (CDS) have expanded on a dramatic scale between 2005 to 2007. The composition of the underlying assets shifted to higher credit risk mortgages and loans issued by non-investment grade companies. Briefly describe each category of credit risk instrument
(ABS,CDO, CLO, CDS). The Investopedia website, or the Federal Reserve
Bank of New York website, or www.bloomberg.com will be useful.
6. There has been a huge number of recent articles about negative interest
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