Dissertation Writers: Describe the model of firm equity as a call option on assets of the firm
A. [2] Describe the model of firm equity as a call option on assets of the firm. What does it mean for this option to be “out-the-money?”
B. [3] Why were many thrifts insolvent by the early 1980’s?
C. [4] Using the equity model in A, and the concept of forbearance, describe and explain the behavior of thrifts, both insolvent and solvent, in the early 1980’s.
D. [2] How does securitization help mitigate the problem described in B?
E. [3] Describe how securitization eventually played a role in the creation of the “RE bubble” of the early- to mid-2000’s.
