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Investment Risk Management - Essay Example
Finance & Accounting
Pages 5 (1255 words)
Investment Risk Management Introduction Lehman Brothers Holdings Inc was a internationally renowned financial service providing firm. The company ranked fourth largest as a investment bank in USA. It had its business related to investment banking, private banking, equity sales, trading research, private banking…
It was recorded as the biggest decline in financial market. With the real estate pricing bubble in 2003 and 2004, the company acquired mortgage lenders who were specialized in loans which were given to borrowers without proper documentation. The company secured $146 billion of mortgage securities in 2006 with a growth rate of 10% from 2005. It had earned record amount of profit from 2005-2007. In the year 2007 it had earned net income of $4.2 billion and in the month of February its stock reached a higher record of $86.18 and a market capitalization of $60 billion. With the rising house market delinquencies, on March 14 of 2007 the company faced its biggest one day drop in last five years. After one year on 15th September 2008 the global financial market suffered one of the biggest falls due to the biggest bankruptcy of Lehman Brothers on Sunday 14th September. Dow Jones Industrial index had a fall of 504 points and FTSE 100 index went 9.9% down in just four days. Reasons behind failure of Lehman Brothers Although the main reasons for failure of Lehman Brothers are defaulting of housing price bubble and liquidity crunch inside the investment bank, still there may be different reasons according to different people. Some blame the CEO of the company for his overconfidence and failure in understanding about the crisis. ...
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