The Research Of Subprime Crisis And Lessons Learnt

The subprime crisis is definitely the first severe financial crisis ever in the global capital market. By far, there is no certain theory to identify and clarify all the causes of this credit crunch, and no practicable approach to prevent the contagion and to mitigate the damage as well. Therefore, we cannot assure that such crisis and market turmoil will not occur again in the future. So this thesis manages to analyze the subprime crisis, to identify the root cause of the market meltdown; and by the lessons learnt, the thesis manages to find various kinds of methods to stop the contagion of the crisis. Besides that, this thesis also recommends that the process of securitization in China should not be diverted, and we should learn a lot from the subprime crisis and find all kinds of ways to prevent any big loss in China as well.This thesis consists of five chapters. The first chapter is the introduction section of the paper; it contains all kinds of views and quotes from those financial celebrities. During the second chapter, we give the clear definition of those subprime related terms, how the subprime crisis broke out, the reaction from the government and its impact on US and global markets as well. In the third chapter, we analyze the 5 root causes of this subprime crisis in depth. The thesis argues that much of the growth and success of the subprime market in the first part of the decade was built on the rise in house prices, the easing of underwriting standards, the use of innovations in financing, and the lack of surveillance system, along with the bad decision made by Federal Reserve. So the fourth and the last chapter of this thesis covers all aspects of the lessons which we have learnt from this crisis and what we should do to help to make our own capital market robust.Although the subprime crisis is the largest one that we have ever seen during the last several decades, we should not divert the path of securitization in the capital market. And we should establish an open and transparent market with comprehensive rules to make it robust. Besides that, we should do all what we can do to make sure our economy will not be greatly impacted by this crisis.