1.(a)Discuss the usefulness of collective investments for the fixed income segment of portfolios. (b)Discuss the main features and characteristics of ETFs (Exchange Traded Funds) and in what respect they are superior to traditional closed ended collective investment vehicles.
2.(A)Explain the different tranches of CDOs (collateralized debts obligations) and the distribution rules of Income and Principal Cash Flows on CDOs. Discuss which tranche offers maximum protection to the investment holder. (B). Using the answer to part A, elaborate further in which way CDOs can create a liquidity squeeze in the financial markets.
3.(A). Explain how securitisation works and what the role is of each party involved during the process. (B). Discuss why securitisation may be very beneficial for both institutions and investors.
no more than 500 words each question.
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