Today is the second meeting of the consortium. 4 students presented their dissertation proposal. One of them came ready with presentation charts, complete with a model and results!!! At that moment, I feel that I should just sink into a hole and disappear. Too depressed with their apparent strong grasp of their subjects and their ability to modify models. Each of their stories seems to link together and weave into one final tale.
At the end of the presentations, me and 3 other students were asked to stay behind to have further discussion with our supervisor. He wanted us to come together to build a story of the credit crunch. He kept insisting on us working together. As a result of this, I am without a dissertation topic anymore. I wasn't sure how to move on with his continuous stream of new ideas. I need a certain topic by monday. Seriously...
Preliminary thoughts after listening to my prof and his argument with another student...
In Shin's model, moral hazard is not seen as a cause of the banking crisis, rather it's largely due to active balance sheet management. AH thinks that moral hazard is still part of the story because banks can gamble via SPV. What struck me is that we may be able to assume that banks were gambling without knowing it. There's a lot of talks bout the complexity of the structured financial assets that no one understands them. In the beginning, these sound like pretty good ideas for risk-sharing and most investors believed they had bought high quality assets given the perceived AAA ratings. So, it does sound as if no one was gambling if we agree to take this side of the argument. I am not sure how convincing the argument will be. Need to look into it further.
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