TY - JOUR AB - In October 2008, in the midst of a financial crisis, Anthony Keating, investment manager at the Boston private bank Billingsley, Blaylock, and Montgomery, was searching for an investment strategy to recommend to his high-net-worth clients. Traditional investments in the equity markets were being decimated, and Keating’s clients would be looking to him for ideas. Inspired by the success of Paulson and Co., Keating began to explore the possibility of entering a trade that would profit as homeowners defaulted on their mortgages. The more Keating learned about the trade, the more he realized that he needed to know about mortgage-backed securities and credit default swaps. The case provides instructors with a chance to introduce these financial instruments, while at the same time providing lessons applicable to students interested in value investing or real estate finance.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 marketsDescribe how credit default swaps can be used to speculate on the value of an underlying financial instrumentIdentify potential mispricing across related financial instrumentsUnderstand the potential risks and rewards of various financial investment strategies that look to capitalize on defaults on subprime mortgages VL - IS - SN - 2474-6568 DO - 10.1108/case.kellogg.2016.000040 UR - https://doi.org/10.1108/case.kellogg.2016.000040 AU - Furfine Craig PY - 2017 Y1 - 2017/01/01 TI - Betting on Failure: Profiting from Defaults on Subprime Mortgages T2 - Kellogg School of Management Cases PB - Kellogg School of Management SP - 1 EP - 25 Y2 - 2024/03/29 ER -