Topic_18_E1 - Topic 18 Exercise 1 Securitization in the...

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Topic 18, Exercise 1 Securitization in the Commercial Paper Market Larger corporations have come to rely extensively on commercial paper as a source of ongoing financing. In times of economic uncertainty, investors become more risk averse. A new use of a securitized transaction has made its way into the commercial paper market in recent periods that allows firms to secure funding. This new concept and use of derivatives is discussed in “Cultivating Sources of Capital,” by Richard Gamble. After reading this article, answer the following questions: 1. The author pointed out that the commercial paper market has suffered four periods of illiquidity. What periods did he identify? The periods started in the early 1980s when Paul Volker pushed up rates to unprecedented levels and continued later in the fourth quarters of 1998, 1999 and 2000. In 1998, it was the Asian Crisis. In 1999, it was fears about the Y2K issues. In 2000, there were three defaults in the commercial paper market after not having a single default
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