Joy Loft

Dear Alex, Welcome to the funeral of love. Welcome to have the wallet in which your money is not yours. Welcome to the party you can’t dance with other pretties.

But we are all sure that you will get more than lose.

Happy Just married.

Joyloft.

The first thing I did in the morning this three days was to open my computer and checked the number of death in the earthquake happend three days ago. The exprence was so scary because the number increased from 7000 to 9000 and now to 14000. It seems that thousands of people??went to die??when you were sleeping.

The management officer knocked out my room this morning to change the filter. When he looked at the small national flag of China on my table, sadness appeared in his eyes.” Are your families safe?”" Yes, they are.”I answered but grey croud of sorrow were around us.The earthquake is really a shocking thing to watch.

God bless China.

Modeling Issues to be addressed For Credit Risk in Sub-Prime Markets.

Key word: securitization, credit risk, transfer, modeling, sub-prime crisis.

The advantages and disadvantages of securitization for issuers and investors: Securitization is a structured finance process, which involves pooling and repackaging of cash-flow producing financial assets into securities that are then sold to investors. For issuers, the advantages of the securitization are obvious: First, securitization reduces funding cost: through securitization, a company ranked BB but with AAA cash flows could be able to borrow at possibly AAA rates. The difference between AAA and BB debt can be hundreds of basis points. Second, reduces asset-liability mismatch: depending on structures chosen, securitization can offer perfect matched funding by eliminating funding exposure in terms of both duration and pricing basis. Securitization allows banks whose liability book or funding is from borrowing to create a self-funded asset book. Third, lower capital requirements: Some firms, due to legal, regulatory or other reasons, have a limit or a range that their leverage is allowed to be. Securitization can allow companies to maintain the ‘earning power’ of asset while lessening their equity on their balance sheets. Fourth, transfer risks: securitization makes it possible to transfer risks from an entity that does not want to bear to one that does. These kinds of risks include credit, liquidity, prepayment, reinvestment and asset concentration.For the credit risk, the issuer transfers their credit risk to the investors who want to bear the credit risk, meanwhile, accepting the risks brought by securitization process itself: since securitization is a structured transaction which may include par structures as well as credit enhancements that are subject to risks of impairment, such as prepayment, as well as credit loss, especially for structures where there are some retained strips. For the investors, the benefits of holding the securitization asset are the opportunities to potentially earn a higher rate of return, to invest in a specific pool of high quality credit-enhanced assets, the diversification of portfolios and the isolation of risks from parent entity. Since the assets that are securitized are isolated from the assets of the originating entity, under securitization it may be possible for the securitization to receive a higher credit rating than the “parent,” because the underlying risks are different.Meanwhile, the risks exposed to investors are accompanied with the benefit from the securitization: First, liquidity risk, which arises from situations in which a party interested in trading an asset can not do it because no body in the market wants to trade that asset. Second, Credit Risk: default risk is generally accepted as a borrower’s inability to meet interest payment obligations on time. Third, event risk: some current events will cause the fluctuation of the security prices. Fourth, current interest rate fluctuations: the same risks faced by all other fixed-income products.

The new requirement of risk management

The securitization process transfers the credit risks from lender to common investors and making the risk management more complicate and high tech. As one of the tools of Credit Risk Transaction (CRT), securitization requires an in-depth understanding of credit risk not only for risk management companies but for the common market participants.

Market participants transacting in CRT instruments should have the capacity to understand and assess the credit-related risks inherent in these instruments. This should include the capacity to understand the major variables on which the valuation of the instrument depends and how the valuation of the instrument will be affected by changes in these variables. Market participants should seek to ensure that their measures of credit exposures to individual obligors are as comprehensive as possible, for example by including both direct exposures as well as indirect exposures from CRT transactions.

As the whole process of securitization above, the participants in the market face different risks, thus requiring diversified management requirements. Several credit risk models are created to different participants. And the process of securitization is classified into different markets. And specific market management tools are designed to address the market issues.

Modeling Issues need to address for the new requirements

Firms that rely on models to assess the valuation and risks of CRT instruments should have sufficient staff and expertise to properly understand the assumptions and the limitations of those models, and to manage their usage appropriately.

Firms should assess the extend to which trading/hedging approaches in CRT instruments may leave the firm exposed to risks that are not routinely captured in the firm’s risk management calculations (eg, jump to default/ or other issuer-specific risks and basis risks). Firms should regularly evaluate the need to incorporate such risks into their routine risk measurement calculation.

Different models are targeted at different risk holders and intermediate authority in the securitization process. For example, development of regulatory minimum capital standards for credit risk based on banks’ internal risk measurement models is the response to the new requirement of bank capitals according to Basel Code II. And Benchmarking Default Prediction Models to testify the normal used models and recalibrate these powerful models.

Sub-prime Mortgage Crisis and its effect to the modeling issues

The securitization of mortgage loans is a complicate process that involves a number of different players.

The frictions among these players can be concluded as:

1:Frictions between the mortgagor and originator: Predatory Lending

2:Frictions between the originator and arranger: Predatory Lending and Borrowing

3 Frictions between the arranger and third parties: Advance Selection

4: Frictions between the servicer and the mortgagor: Moral Hazard.

5:Frictions between the servicer and third-parties: Moral Hazard.

6:Frictions between the asset manager and investor: Principal Agent.

7:Frictions between the investor and credit rating agencies: Model Error.

Five frictions above are believed as the causes of the sub-prime crisis. The problems begin from the Friction1: many products offered to sub-prime borrowers are very complex and subject to misunderstanding and/or misrepresentations. This opened the possibility of both excessive borrowing ( predatory borrowing )and excessive lending(predatory lending).

Friction 6 brings a principal-agent problem. In particular, it seems that investor mandates do not adequately distinguish between structured and corporate credit ratings. Asset managers have an incentive to reach for yield by purchasing structured debt issues the same credit rating but higher coupons as corporate debt issues.

Friction 3 worsened the phenomenon, without due diligence by the asset manager, the arranger???s incentives to conduct its own due diligence are reduced. Moreover, as the market for credit derivatives developed, the arranger was able to limit its funded exposure to securitizations of risky loans. Together, these considerations worsened the friction between the originator and arranger, opening the door for predatory borrowing and provides incentive for predatory lending ( Friction 2).

The inability of the rating agencies to recognize the arbitrage by originators and respond appropriately meant that credit ratings were assigned to sub-prime mortgage-backed securities with significant error. The friction between investors and the rating agencies is the final nail in the coffin( Friction 7). Even though the rating agencies publicly disclosed their rating criteria for sub-prime, investors lacked the ability to evaluate the efficacy of these models.

All these issues need to address in the modeling in the credit risk management, especially the rating flaw in the securitization market will cause great damage to the sub-prime mortgage markets.

Reference:1 T Sabarwal “Common Structures of Asset-Backed Securities and Their Risks, (December 29, 2005) 2 Fixed Income Sectors: Asset-Backed Securities - A primer on asset-backed securities, Dwight Asset Management Company (2005).

3 Credit Risk Transfer, Basel Committee on Banking Supervisor. The Joint Forum, (October, 2004)

4 Credit Securitization and Credit Derivatives: Financial Instruments and the Credit Risk Management of Middle Market Financial Loan Portfolios. Sabine Henke /Hans-Peter Burghof /Bernd Rudolf (January,1998)

5 Understanding the Securitizations of Sub-prime Mortgage Credit.Federal Reserve Bank of New York Staff Reports (March 2008)

YouTube has enhanced their services which were open to wider range of mobile phones. It was a really good news because if watching videos could be easy like that, I wouldn’t hesitate at the buying of a new iPod nano or wait for an impossible iPhone. Then I started to think maybe I can watch the Olympic Games on my mobile, according to CCTV’s move to new media.

Heard in a podcast that the service will run on SELECT devices from Motorola, LG, Nokia, and Sony Ericsson. I couldn’t wait to check the list of phones that “YouTube for Mobile” supports. Unfortunately, my phone was not included. My whole imagination collapse in that second.

However, YouTube mobile will work for most types of phones sooner or later since that list keeps growing. And at that time, any S60 or S80 phone will make Australia Open’s ban on laptops bullshit.

Viv called and asked me to go to “Yi Jia” with her in her “Chinese”. I couldn’t understand her anyway. Finally, she gave up and said “IKEA” instead. I understood her right away and told her that I would go (According to me, weekends are bound to be the time for any kinds of shopping).

When we got there, it was time for dinner. Viv and I and her roomates, Court and Holie, of course, went directly to have dinner first. We were chatting while eating. Viv drank the Coke and asked me “how’s the mousse?” I swallowed the fries and answered “A little bit of… too sweet”. Suddenly I felt a puzzled gaze at me. I looked up and found that it was from Holie. She was at a loss and staring at the meat ball in my fork……. for a while, she asked “Is that too sweet?”

After dinner, the main course??hopping, was served.

Holie and Court tried really hard to persuade Viv into buying a rug together. But Viv would not agree anyway. She told us her unpleasant expierences cleaning rugs at home - almost a Cinderella. She was referring all the discusting things on a rug, from dust to hair to bacterias, when I suddenly found unknown words that she was using. It was so weird because they sounded like “more fun”, but how could she have “more fun” after doing those things she hated? Over and over again, I understood finally. What she said was actually “ma fan”, in Chinese.

Elephant Big and Mouse Small are good friends.One day,they had a walk in the forest after raining.While they were talking,Mouse Small disappeared.
“Where are you?”Elephant Big asked.

“Help me.”Mouse Small shouted.”I am in the wallow.”

Elephant Big turned round and found the mouse in a very deep hole.

Elephant Big put his nose into the wallow,but it is not long enough.So he switched to his penis,upon which small mouse climbed up successfully.

Then,they continued their walking,but in a while,the Elephant Big disappered.

This time,it was the Elephant Big who dropped into a deep wallow.

“Help me.”The big elephant yelled.

“What shall I do then?I am just a small mouse.”The Mouse said.

“Do your best.Find a way to save me.”Elephant Big begged.

Mouse Small rushed home and drove his BENZ to the wallow and circled a string onto the neck of the elephant.But the elephant was too heavy to be moved.So Mouse had to go home and changed another car,his great BMW,but it didn’t work,either.In the end,Mouse Small used his luxury Rolls-Roys,and successfully saved the elephant’s life.

This story tells us: If your penis is big enough,you needn’t buy a luxury car.

It is definitely hard for me to experience a self-exposure. I am kind of pessimist in nature and the sensitivity to external changes has decreased while my age increases. So words are not expressive and emotion is difficult to find a way to vent.

Art is the most healthy and acceptable way to express an emotion. However, painting, music and photography are not available for me now while I feel exhausted after years of addiction to them. Words become my last shift. But I hate talking face-to-face. I tried my best in pretending to be a happy person, a pretty with simple thinking. But actually, I am clear that I am not.

Like a mirror reflecting image, self-exposure should convey the information of my true heart. But the form of expression is still confusion for me.

I talked to my Mum last week and told her that I felt like I was suffering a depression, my words made my Mum feel worried in the next week. I feel a bit guilty for my words, since she is not a happy person, either. She wished me to become a poet while she was pregnant. Unfortunately, I didn’t get the heritage of her conscious sensitivity, but sentiment pessimism. We always persuaded each other to have a positive attitude to everything that we have experienced, even including the bad things. Tolerance has become a family gift while punishment disappeared as a meaningless life particle. But what is the meaning of life?

Mimic Interview with President Bush of United States, translated from the writer of Wangxiaofeng. (Original Chinese version )
The interview is a combination of Chinese political ironic words and jokes from Bush.

Part 1
(Lifeweek Magazine, Starbucks in Adam Street, Chicago ) George. W. Bush, President of United States received the exclusive interview from ‘Lifeweek’.Bush is in a T-shirt with words:”Don’t bother me,I am sucked.”on his back.

In the 72 hours after the historic terrorism attack, Gao, the chief reporter of ‘Lifeweek’ interviewed with President Bush, who gave the first official response after 9.11.

Gao: How are you doing, Mr President, it’s really my great honor to have this interview. I am afraid you are not familiar with our Chinese media, so I would like to show you some magazines of us, looking forward to your opinions.
Bush:(Steered for a while)The cover of your magazine is impressive, splendid and creative.. What are these characters? Arab?

Gao: Sorry, Mr President. They are Chinese.
Bush: It is amazing. My father used to have a brush and it is unbelievable that you can use this kind of brush to create such characters.

Gao: Well, Mr President. Can we begin our interview and answer me some questions?
Bush: (Smacked his lips over the coffee)Well, you know, I seldom receive interviews, because most of magazines are full of scandals and affairs. However, I have to speak out what fulfills my mind since your magazine seems to have a great influence.

Gao: Thanks for your trust . Don’t worry, our magazine is not interested in the personal life since you are not President Clinton. Well, the first question is how is your feeling now after 9.11?
Bush: Fucked the terrorism, our United States is a great, democratic and liberated country. But now, our great country is challenged by the fucked opposite power, which is definitely small and week.

Gao :Could you tell us who are suspicions of these terrorists?
Bush: They are obviously those who disagree with our political system, which was supposed to be peaceful evolved .They found that they couldn’t achieve their goal so they felt great angry and soon made such a dirty attack. But you know, this terror attack is really a trash compared with our Hollywood films. We have a group of excellent movie directors and producers. If they want to plan a terror attack, I am absolutely sure their attack will be more exciting than this one. So my conclusion is that this attack is just an accident because thousands of attacks happen every year in Hollywood, the west coast every year .But this attack is mistook for the location. I know New York is a fantastic city but it is really bad for a movie scene. What a dame movie with this stupid mistake? I will forbid that movie to the public, since it has brought me such a big trouble.

Gao: Ok, who might be the planner of this attack or this accident as you said?
Bush: (Thought for a while) Bin Laden

Gao: Well, it is said that this attack relates to your global political strategy, which is offensive to many nations.
Bush: It is bullshit. What the earth will be if people lose their brain? What the world will be if there is no United States? United States spread its advanced political system representative of ultimate production capacity to every corner of the world, which is a great contribution to the whole human being. Hegemonism is a humiliation of our behavior. There will be no rules in the world if there is no Untied States.

Gao: But many countries are not so developed as U.S. Your politics is always behalf of your own benefit.
Bush: That’s the reason why we are so strong.

Gao: It is said to be terrorism upon the official definition. But I heard that many people said your American is terrorism, too.
Bush: No doubt. Have you ever seen terror movies? All of them are from American directors.

Gao: Are you sure?
Bush: Yes, of course.

Gao: You have evidence to prove that?
Bush :Yes, as the president of United States, I have to be responsible for my words. Bin Laden becomes the upstart by the oil business. I understand these new parvenus, who can do whatever Paris Hilton does, but if they want to stand the opposite side ,they die. Taliban is brought up by my father’s father but now they are even against me. Treacherous curs.

Gao: Do you have any details to prove your words?
Bush: Yes. Bin gave me a call last year to ask me to give him a hand for his Hollywood entertainment career. I was so busy with my president election that I turned my back to him. So he supported my enemy to vent his anger. But in the end I was the winner by the cheating of votes, or what the hell world will be without me?
Gao: Is this all your evidence?
Bush:(Found his coffee run out).Hey, Pretty, more coffee

Gao: You know, Mr President .Everyone in the world is watching you and the evidence in your hand. A small behavior of you even can change the world history.
Bush:(Looked around for a while)Tell you the truth, the reason we think the suspicious is Bin, because….

(To be continued…)

One of my colleagues went into the office with a Burberry umbrella in his hand. In China, Burberry is dear to most people since a luxury brand is a symbol of rich class. But, even if a person wears a Burberry coat as well as a scarf of the same brand, it does not always mean that this guy is wealthy. Because that might be the only Burberry stuff he has owned, which becomes his tool for showing off. However, if a guy has a Burberry umbrella, the situation will be totally different. Since few people would like to choose an expensive umbrella for exposure only on rainy days.

Familiar with his financial situation, I quickly stepped up with my eyes full of doubts, and asked: “Hey man, your umbrella is a fake, right?” And he gave me a scornful response:” I never use ANYTHING fake.” Wow, real big words. I certainly didn’t want to miss the chance to check this out.

Soon, I believed that this umbrella is a REAL one. Because a label “HEAVEN” is on the umbrella rather than it passed the test of my skilful distinguish of the pirated brands. It was all clear now that this guy had never heard of anything called Burberry. But how about the company that produces “Heaven Umbrella”?

P.s. :”HEAVEN” Is a famous Chinese umbrella brand.

Chinese Edition

Story happened between a group of monkeys and a man.

There were always 100 chestnuts provided by the man,who has insisted it?on while the monkeys have passed from generations to generations.So,part of?the monkeys,who?were usually thought themselves to be intelligent,supposed the 100 chestnuts to be a natrual truth.Meanwhile,the other part, we called them “the stupied”,made fun of?the phonomena:”It is just a guy blowing off his boring.”

One day,the?man mistook the number of chestnuts,and soon the?smart monkeys summarized it to?a science called statistics from the accident.And it is the kind of science that has promoted the monkeys to a higher intelligent animal. However,the stupied were still kidding the guy in their mind:”It is just a mistake.”Of that we have to admit that even God sometimes make mistakes.

As we know:Human beings have evolved from monkeys. And in the end of the story,my question is “How can we prove that we are not monkeys and the man doesn’t exist?”