Bubble burst, Business Economics

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  Situation: Only a few astute operatives say the crash in real estate prices as the USA entered the summer of 2007.  You were one of the few that appreciated that real estate prices were a greed and government driven "bubble". Your hedge fund has $10,000,000.00 set aside to profit from such institutions and you have been assigned to the project of designing and executing a strategy to profit from the inevitable "burst of the bubble" that was to come [It in fact occurred during July, 2007 and in retrospect we can see that the "bubble burst" right after the 4th of July Holiday].

Assignment:

Design and explain a strategy to profit from the drop in home and mortgage values. For purposes of this assignment assume that the total drop in prices and values in the real estate industry was 30% from July, 2007 and July, 2008 and an additional 15% from July 2008 to July 2009. Also assume: [1] You design and implement your strategy on May 1, 2007;  Your fund investors wanted to be exposed to any position for no more than 18 months; [2] You will be fully invested in the project.


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