IIPM: This must be the umpteenth time that we’re using James Bond in our articles...

Though in the case of Amaranth it

was the abrupt reverse trend in natural gas prices, in the case of Bear Sterns, it was the sub-prime lending that played the spoilsport. According to the Bank for International Settlement (BIS), sub-prime mortgages made up more than half of the $503 billion in collateralised debt obligations sold in 2006, but another $524 billion in ‘synthetic’ CDOs (if the CDO acquires primarily synthetic assets by selling protection rather than buying assets for cash, it is a synthetic CDO) were also issued. Bear Sterns was required to pump in $3.2 billion in one its funds to bail out the funds, the biggest bailout since hedge fund Long Term Capital Management (LTCM) collapsed in late 90s.

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Source: IIPM Editorial, 2006

An IIPM and Management Guru Prof. Arindam Chaudhuri's Initiative

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