The 2008 Global Economic Crisis Causes Cures and Curads
The following is a description of the parties, financial instruments, sequence of events, and transactions in The SEC vs. Goldman Sachs case, which was settled in the summer of 2010.
The central players in the Goldman Sachs ABACUS deal in 2007 include the following:
Goldman, Sachs & Co. A prominent global investment banking and securities firm founded in 1869 and located in the heart of Wall Street. Goldmans credo is they bring together people, capital and ideas to produce solutions and results for clients by playing a number ...
The option pricing model was first developed by Myron Scholes and Fischer Black and extended by Robert Merton.
For a standard stock option, option pricing theory expresses the value of an option as a function of five factors: the stock price, the exercise price, the time until expiration, the risk-free rate of interest, and the riskiness of the stock. The value of an option increases with the riskiness of the stock.
Option pricing theory has been extended to the analysis of other types of financial instruments. In addition, other kinds of non-financial ...
The capital asset pricing model provides a mathematical measure of investment risk and shows how diversification reduces investment risk. The model offers a technique to calculate the total risk of a diversified portfolio based on: (1) the risk of the individual investments in the portfolio and (2) the degree of correlation in investment returns among the individual assets that comprise the investment.
CAPM is represented by the following equation:
E(Rj) = Rj + bj
E(Rj) the expected rate of return on an asset j
Rf is the risk free rate of interest
b is the ...