Friday, July 18, 2008

Understanding Subprime Crisis

PRIMARY MARKET
The primary is that part of the capital markets that deals with the issuance of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue
http://en.wikipedia.org/wiki/Primary_market

SECONDARY MARKET
The secondary market is the financial market for trading of securities that have already been issued in an initial private or public offering. Alternatively, secondary market can refer to the market for any kind of used goods.
http://en.wikipedia.org/wiki/Secondary_market

SUBPRIME LENDING
In general, subprime lending (also known as B-paper, near-prime, non-prime, or second chance lending) is lending at a higher rate than the prime rate.
Subprime lending is risky for lenders and occasionally for borrowers also, due to the combination of high interest rates, frequently poor credit histories, and potentially adverse financial situations that are sometimes associated with subprime applicants
http://en.wikipedia.org/wiki/Subprime_lending

MORTGAGE BACKED SECURITIES
Securities whose value is derived from an underlying pool of residential mortgages. The mortgages are pooled and secured against the issue of bonds. The bonds are known as MBS.

SUBPRIME CRISIS
http://en.wikipedia.org/wiki/Subprime_mortgage_crisis
http://www.thehindubusinessline.com/mentor/2007/08/27/stories/2007082750291300.htm
http://www.thehindubusinessline.com/2007/09/25/stories/2007092550550800.htm
http://www.rediff.com/money/2007/sep/06perfin.htm