In the financial market there are four general classifications of securities, they are money markets, bonds, equities,

and derivatives. All of which have been affected by the financial crisis and economic events derived of recent years. The money market is a subsector of the debt market which consists of very shortterm debt securities that are highly marketable. Certificates of Deposit or CDs as we call it, is a type of money market instrument. It is a time deposit with a bank where the bank pays interest and principal to the depositor at the end of the fixed term. The bond market is composed of longer-term borrowing or debt instruments; this market includes Treasury notes and bonds, corporate bonds, municipal bonds, mortgage securities, and federal agency debt. The mortgage backed securities or pass throughs allow the mortgage originator to service the loan, collecting principal and interest payments, and passing payments along to the mortgage purchase; hence the pass through name. Investors interested in this form of bond market instrument can buy and sell securitized mortgages like any other bond. Equity securities, better known as commons stocks, represent ownership shares in a corporation. Common stocks have two important characteristics as an investment; its residual claim and limited liability features. The residual claim feature allows shareholders to receive residuals as cash dividends or reinvest it in the business in order to increase the shares value. Limited liability protects shareholders as they are not personally liable for the firms obligations. Derivative markets features futures and options. Futures and options provide payoffs that are dependent upon values of other assets. In discussing options, there are two types; call and put options. Call options allows its holder the right to purchase an asset for a specified price, on or before a specified expiration date, while put options are its exact opposite. Over the last several years, the four segments of securities and the values of their security instruments have all been affected by the financial crisis and economic events. In particular, the subprime mortgage crisis has affected these segments either directly or indirectly. As mortgage delinquencies began to rise while mortgage backed securities began to decline and lost most of their value. Large investment banks trading in mortgage backed securities saw a loss in earnings; such as Lehman Brothers. With the housing bubble bursting, the economy began to crumble, interest rates would fluctuate and inflation occurs, affecting each segment. The stock market also began to crash and affected the value of stocks and equity securities. As of late, though not what it once was the economy has been on the rise with banks making record profits and the government earning money from its bailouts; as stated in the latest Time magazine article. However, the article also advises that precautions need to be taken and that five years after the market crashed, it can very well happen all over again as banks are now larger than before and finance has become a greater percentage of the U.S. economy.

I would like to present to you the article titled, Wall Street Gets A Taste Of The Next Financial Crash by Panos Mourdoukoutas. This article relates to what we are learning this week in class as it pertains to not only the stock market, common stocks, commodities, but also to other securities such as Treasury bonds. This article discusses how assets during the 2008 financial crisis would decline simultaneously across the board in almost every asset category and that is why the 2008 financial crisis was so severe. Normally when the economy is stable, different assets climb and decline in different directions; however, during the span of 20012007, stocks, commodities, and T-bonds unconventionally rallied in the same direction and to date they continue to move in the same path. Should we continue to see such shared movement, we can expect another market crash in the near future.

The following article, What Is a Mortgage-Backed Security? by Chris Wilson on Slate.com is an interesting article Ive stumbled upon, as it not only explains what a mortgage-backed security is, but how mortgage-backed securities essentially destroyed securities firm Bear Stearns. Mortgage-backed securities are similar to bonds, they are instruments of securities issued by the government and corporations that promise to pay fixed amounts of interest for a defined period of time, as described in the article. They are generally a safe investment when the housing market is well and interest rates are low, however, when the nation went into a mortgage-default crisis, firms such as Bear Stearns began to see their revenues fall. Bear Stearns being a firm which heavily concentrated on such securities was forced to write down the value of their mortgage-backed securities; the firm was eventually taken over by JPMorgan Chase at a lowly $2 per share.