CAED102 – FINANCIAL MARKETS
PREFINAL EXAMINATION
DECEMBER 15, 2020
Shaneen Adorable
Name : _______________________
MOVIE: MARGIN CALL
Scenes or situations
The scene where Peter finished Mr. Dale’s
project and discovered that trading will
soon exceed the historical volatility levels
used by the firm to calculate risk.
Due to the firm’s problem with
OVERLEVERAGE, and if its assets
decrease by 25%, the firm will owe more
than its market capitalization.
As their cover-up plan, Ceo John Tuld came
up with the idea to just sell off all the toxic
assets to limit the firm’s exposure.
The seven figure bonuses that the traders
will receive if they achieve a 93%
reduction in MBS asset classes.
When Mr. Rogers confronted Mr. Tuld
about the current crisis and told him that
“Sharp gains and losses are simply part
of the game.”
AC22
Section : ______________
Concept Proof (reason)
Mortgage Market and Since the firm discerned multiple &
Derivatives consecutive losses and its share price
had already dropped, that permitted
them to engage in hedge fund trading
with derivatives. In which, derivatives
can be bought by investors in order to
reduce the amount of volatility in their
portfolios.
Capital Market Trading With the firm’s issue on overleverage,
(Credit Quality Risk) it shows that the firm’s credit quality
risk has a low utilization of financial
leverage. It shows here that the
possible decrease in leverage risks the
market’s capital and it is apparent to
lose more than the initial investment.
Financial Assets As financial assets give rise to the
financial liability or equity of an
entity, the concept of selling off all the
toxic assets was the option considered
by the CEO in order to get rid of all
the investments that have become
worthless and for which no longer a
functioning market.
Diversification Investors Under the concept of Managing Credit
Risks in Financial Markets, the
strategy that the traders did is the
Diversification Investors. In which, it
is their way to reduce more exposure
into risk by diversifying their
holdings.
How Investment Banks Make This statement by Mr. Tuld only
or Lose Money entails that in Financial Markets,
making and losing money is already a
part of how you invest and trade
money in the world of stock and
capital markets.
INTEGRATION PAPER

The movie “Margin Call” elucidates what really happened during the Financial Crisis in
2008. It assessed the actions and decisions not just of the investment firm but of all the master
minds behind it. Also, the movie digs into the societal costs of high finance and on how the
power of self-rationalization and personal corruption are practiced in the world of capital market
and trading. Based on my analysis, the main theme of the movie focuses on business ethics and
lessons in business that go the world of investment. In which, there goes the debate on whether
personal interest should undermine the relationship between customer/employee investment.

The specific scene that really invested an interest in me was the plan and decision of Ceo
John Tuld on how to handle the situation. It only shows that one wrong move and decision from
the upper management can insanely damage investors, employees and most specially the market.
Not only that Tuld’s decision disturbed me but the fact that it proves how money controls
everything and can be easily manipulated by those who have power, and that, is where
corruption and selfishness comes from. That crisis entails an ethical dilemma that we may face in
the harsh reality of real world. And in times like this, we can see and encounter different types of
people who have different perceptions of what is right to them.

There were various concepts and principles in Financial Markets that were highlighted in
the movie. One of those concepts is the Mortgage Market and Derivatives , in which, they have
to deal with hedge funds and the use of derivatives in exchange market and in trading. Next, is
on dealing with risks in capital market trading by analyzing how to minimize the damage and to
what went wrong with their historical volatility levels. The principles of financial instruments
were also emphasized as where they decided to sell-off investments such as the toxic assets for
their value had dropped off and their purchasing price in the market is undeniably impossible.
Too, in the world of business investments, lapses are always evident and sometimes even the
most unethical decisions should be made for it is the last resort to lessen any more damage.
Wherein, in the movie, the concept of credit risk management was also observed to resolve the
firm’s problem in adverse selection and moral hazard. The firm has resorted to diversify their
investors in order to threshold the firm’s scandal. Lastly, just the simple principle on how money
works in the world of investment trading and how such matter can be easily made or break in just
a snap. It teaches us that in trading it’s either you win or lose and that is actually unpredictable
for all classes of investors and in the market.

One important thing that I realized and learned in this movie is that ethics should never
lose its relevance. It must always be given importance and that all the lessons that it imparts
individuals and institutions should not be set aside. We have seen here that ethical lapses and
greed for personal gain leads to irrevocable damage and it affects not just the firm but all the
investments and lives of its employees and clients. On the off chance that there are any
moralities in the business world, the firm’s strategy for endurance is corrupt. Yet, in the real
world with alternatives, there is just winning and losing. A portion of the main casts battle with
compassion and survival badly crushed with each other. Be that as it may, their decision
fundamentally comes down to pain or gain.