Betting on Failure: Profiting from Defaults on Subprime Mortgages

Kellogg School of Management Cases

ISSN: 2474-6568

Publication date: 20 January 2017


After reading and analyzing the case, students will be able to:

  • Explain how home mortgages are securitized into financial instruments that are traded in public markets

  • Describe how credit default swaps can be used to speculate on the value of an underlying financial instrument

  • Identify potential mispricing across related financial instruments

  • Understand the potential risks and rewards of various financial investment strategies that look to capitalize on defaults on subprime mortgages



Furfine, C. (2017), "Betting on Failure: Profiting from Defaults on Subprime Mortgages", Kellogg School of Management Cases.

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