Financial Management Analysis: The Big Short Movie Case Study

This report provides a financial management analysis of the movie 'The Big Short.' It examines the causes of the 2008 financial crisis, focusing on the housing bubble and subprime mortgages. The report analyzes the actions of banks and their ethical implications, particularly in relation to ethical egoism. It also discusses the need for risk management and transparency to prevent future crises. The analysis includes references to academic sources and the movie itself, highlighting key concepts and events. The report concludes with recommendations for preventing similar financial collapses in the future, emphasizing the importance of accurate risk assessment and regulatory oversight. The report covers the key financial concepts and their real-world impact as depicted in the movie.

Running head: FINANCIAL MANAGEMENT
Financial Management
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

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Table of Contents
Answer to Question 1:.....................................................................................................................2
Answer to Question 2:.....................................................................................................................2
Answer to Question 3:.....................................................................................................................2
References:......................................................................................................................................3

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Answer to Question 1:
The Big Short is a drama or comedy movie and it depicts the actual story of the financial
crisis with the help of a number of male investors in finance world; they anticipated the housing
bubble and credit in becoming filthy rich. During this period, the banks have started to fie bonds
consisting of riskier mortgages. Such risky mortgages are considered as subprime mortgages due
to which the housing market had popped up on such bad loans. This had been evident in terms of
disappearance of $5 trillion related to pension money and value of real estate, $401,000 related
to savings. Along with this, 8 million individuals had lost their jobs, while 6 million had lost
their houses (Cheng, Raina and Xiong 2014).
Answer to Question 2:
In this movie, it has been found that the banks had wrapped up along with selling the
mortgages, since they had been solid investments. They had assumed that no loan default would
take place on the loans provided in buying the houses. At the time of bundling of the bankers and
selling of subprime mortgages, they had acted in accordance with their best interest. Thus, this
could be adjudged as an ethical egoism, which is an action of increasing self-interest. In this
case, acting greedy is good, instead of trying to be balanced or prevent anything (Lewis 2015).
Answer to Question 3:
In order to prevent such credit crunch and housing bubble in US, it is necessary to depict
the actual risk and return without the provision of any governmental support. This would reduce
the pressure regarding the fickle regulators lacking ability to stop the growing bubble. This

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would help the investors and the American individuals to avoid over-excitement about the
market.
References:
Cheng, I.H., Raina, S. and Xiong, W., 2014. Wall Street and the housing bubble. The American
Economic Review, 104(9), pp.2797-2829.
Lewis, M., 2015. The big short: Inside the doomsday machine (movie tie-in). WW Norton &
Company.