The 2008 financial crisis forced financial professionals and economists to reconsider their concepts regarding financial markets and institutions relative to macroeconomic views. Some of the views include adequate governance and the effectiveness of insuring credit risks. This reflection highlighted the liquidity risk arising from bank dependence on securitization for liquidity.
As you read The Impact of the 2007 Liquidity Shock on Bank Jumbo Mortgage Lending, focus on the following risk scenarios:
- Jumbo loan mortgages
- Credit risk
Citigroup was a part of the 2008 financial crisis. First conduct research on Citigroup in 2008 and identify the risks they were involved in. Use the taxonomy of risks (Figure 5.1 in the textbook) to analyze and measure the types of risks taken by Citigroup. Based on the risks you identify, make recommendations for how those risks could have been mitigated.
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In your research on Citigroup, focus on the following:
- Risk identification
- Causes of the risk
- Risk analysis
- Risk measurement
- Recommendation/management of the risk