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John Paulson, Goldman Sachs and Abacus 2007 AC1 - Term Paper Example
Finance & Accounting
Pages 4 (1004 words)
Date John Paulson, Goldman Sachs, and Abacus 2007 AC1 The issue at stake is that of Gold man and abacus 2007 AC1 deal. Paulson and Goldman entered into together with others for speculation purposes this deal. This was at the verge of the looming financial crisis that largely hit the mortgage industry…
The bonds were so risky and this could be witnessed in their rating of “BBB,” this could be translated that incase there was a collapse such bonds could feel the most of the pinch. Due to imperfect information Goldman comes in with the knowledge of a German bank which is in the position of buying the risk that Paulson is exposed to as Paulson looks for a short. This bank is only able to buy the securities if the if they can be introduced by an external party. Goldman is still having the information that not every manager would not be willing to work with Paulson; this is because of the risk exposure and public complaint directed towards Paulson. With all this information, Goldman approaches ACA management bank for insurance brokerage. Successfully the bank accepts be become the manager in the deal of which it would assist Paulson in the selection of securities (Cohan and William, 27). By February 2007 Paulson had reached an agreement after working on a portfolio, they signed the agreement the same year. Gold man being behind all these does not reveal any information to anyone about the involvement of ACA and Paulson in the deal and the deal therefore remains a secret. The information that Paulson is engaged in an insider trading hence is shorting the securities also remains a mystery. ...
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