Financial securitiesSubject: Economics1) Describe in your own words similarities between the development of LIBOR and the LAW Merchant. What are the benefits and shortcomings of market institutions that self-organize?2) Describe in your own words how the way LIBOR is defined may have been a contributing factor to the abuses?3) As of April 2013, the British Bankers? Association?s role in setting LIBOR rates became subject to regulatory oversight, and manipulation of the rate has become a criminal offense. Ultimately , the British Bankers? Association will be removed from LIBOR?s calculation altogether in favor of a new administrator- which will also be regulated. Describe in your own words why it took from the early 1980s until 2008 for problems with LIBOR to surface in substantial form. Why did it take that long for the calculation and publication of LIBOR to become a regulated activity? Of the things we covered in class, what does this remind you of most?4) The bank traders accused of manipulating LIBOR in order to profit on derivative contracts and trades were particularly cavalier, communicating by email to others with their own banks and to traders working at competing banks- leaving a clear paper trail for regulators and plaintiffs lawyers to eventually to follow. Crazy? Describe in your own words why you think they appeared so unconcerned about detection. What does this tell you about the ability of markets signals to penetrate large institutions to the level of individuals actors and why?5) It is 2006, and Billy Barrow, a trader at Banko Bank calls Candy Canary, his counterpart at P-EU Bank. Billy and Candy started in derivatives trading the same year after graduating from McFoster?s MBA program. Billy asks Candy to keep P-EU?s LIBOR rate low until Billy can work Banko out of an unfavorable position, promising a bottle of Bollinger Champagne for her efforts. Candy knows it is a common practice. What should Candy do?6) What?s the next big scandal and why?!
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