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saisriram
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Joined: July 14th, 2002, 3:00 am

JP Morgan- 2 billion trade loss

May 11th, 2012, 4:09 am

Can anyone help to understand what exactly happened, how it happened and how was it not detected earlier and how did it come into light ?
 
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daveangel
Posts: 17031
Joined: October 20th, 2003, 4:05 pm

JP Morgan- 2 billion trade loss

May 11th, 2012, 5:39 am

you should ask Bruno Iksil... I am trying to locate the original thread that discussed his trades here.http://www.bbc.co.uk/news/business-18030022
knowledge comes, wisdom lingers
 
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daveangel
Posts: 17031
Joined: October 20th, 2003, 4:05 pm

JP Morgan- 2 billion trade loss

May 11th, 2012, 6:04 am

actually I saw this excellent analysis on dealbreakerQuote 1. make huge trades that you can't unwind 2. lower your balls into a vise, tighten 3. have conference call
knowledge comes, wisdom lingers
 
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hayes
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Joined: July 18th, 2008, 11:24 am

JP Morgan- 2 billion trade loss

May 11th, 2012, 6:48 am

QuoteOriginally posted by: saisriramCan anyone help to understand what exactly happened, how it happened and how was it not detected earlier and how did it come into light ?I think by their (Jamie Dimon's) own admission, they were sloppy:QuoteThe strategy taken at its CIO had been "riskier, more volatile and less effective" than previously believed, Mr Dimon said."There were many errors, sloppiness and bad judgement. These were egregious mistakes. "They were self-inflicted and this is not how we want to run a business."JPMorgan isn't that different from Citigroup in that it is so large it is impossible for the right and left hand to be in constant communication with each other, (plus there are about x dozen other arms waving about in an uncontrolled manner). So mistakes get made.It would be easy to say that this is all about large banks still chasing high-risk/high-return strategies and desperately waiting for the "good old days" of Prop Trading to return, (and there is a bit of truth to that*) but it would over simplify the problem. Like most "closing the barn-door" legislation, the Volcker rule would not have stopped this, meaning either the industry is not regulated enough, not regulated properly or maybe that this was intentionally out of scope of the Volcker rule and this kind of loss does not need regulating and that this was not a regulatory issue at all.* There is a " very large American investment bank" which I may or may not have already named here, which I know from a friend who interviewed there, is actively hiring for regulatory roles, and that when they sit down in the interview with you state that:"We are funded directly by Front Office, have an almost limitless budget, and our primary remit is to understand the changing regulatory environment and manage it so that our desks can continue to trade and make money 'Business as Usual'."Personally I would want to work for the bank that says:"We are funded by directly by Front Office, have an almost limitless budget, and our primary remit is to understand the changing regulatory environment and manage it so that our business can be redirected accordingly and desks can find new opportunities to trade and make money"I know which one is most likely to be making money in 5 years time.
 
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rmax
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JP Morgan- 2 billion trade loss

May 11th, 2012, 7:33 am

It is interesting that a couple of weeks ago the "Whale" was being touted as being an issue. I thought at the time that it was impossible to say whether it was an issue or not, as it was notional contracts that they were quoting... However it seems that the people doing the reporting knew the real score....It begs the question: why was this raised 2 weeks ago in the press? It sounds very much as though the information was seeded prior to the official release. Or there was a leak, and that kicked somone at JP to find out what was going on.
 
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hayes
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JP Morgan- 2 billion trade loss

May 11th, 2012, 7:42 am

QuoteOriginally posted by: rmaxIt is interesting that a couple of weeks ago the "Whale" was being touted as being an issue. I thought at the time that it was impossible to say whether it was an issue or not, as it was notional contracts that they were quoting... However it seems that the people doing the reporting knew the real score....It begs the question: why was this raised 2 weeks ago in the press? It sounds very much as though the information was seeded prior to the official release. Or there was a leak, and that kicked somone at JP to find out what was going on.Interesting..... Google brought up this......and this.....
 
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MattF
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JP Morgan- 2 billion trade loss

May 11th, 2012, 7:42 am

Looks like Bruno Iksil would have a greater life-expectancy at a Japanese fish processing plant right now. Agree with rmax that it's not a coincidence.
 
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hayes
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JP Morgan- 2 billion trade loss

May 11th, 2012, 7:55 am

QuoteOriginally posted by: MattFLooks like Bruno Iksil would have a greater life-expectancy at a Japanese fish processing plant right now. Agree with rmax that it's not a coincidence.Not sure. It might be the case. I suppose it depends on how well organised you believe JPM senior management are. That kind of media management involves a lot of co-ordination and trust within an organisation where information travels freely.It could be just as likely that Bruno's world have known about it for a month, the whole floor knew about it by the end of the day and by the end of the evening the traders had told all their mates over half a dozen shandys.From that point on, it is not beyond the realms of impossibility that it took a few days to investigate, deliver the news up to senior management and then Jamie Dimon's office to launch an investigation, which I'm sure they'd have taken their time with, consulted legal advisors and maybe even pre-advised auditors. All legitimate stalling tactics that would allow the disseminated information to flow freely through finance blogs and maybe even the financial press. Basically, we should rename this the waiting for AlphaVille strategy
Last edited by hayes on May 10th, 2012, 10:00 pm, edited 1 time in total.
 
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japanstar
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JP Morgan- 2 billion trade loss

May 11th, 2012, 8:14 am

QuoteOriginally posted by: rmaxIt begs the question: why was this raised 2 weeks ago in the press? It sounds very much as though the information was seeded prior to the official release. Or there was a leak, and that kicked somone at JP to find out what was going on.This is called "crisis management" and you have consultancy companies specialized on how to bring to the public "bad news" in a way which will hurt you the less. It is very much used (especially in the US) by companies, politicians etc... In this particular case they clearly released the "bad news" in two steps to limit the damages. cmEDIT: Typo
Last edited by japanstar on May 10th, 2012, 10:00 pm, edited 1 time in total.
 
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hayes
Posts: 1181
Joined: July 18th, 2008, 11:24 am

JP Morgan- 2 billion trade loss

May 11th, 2012, 8:28 am

QuoteOriginally posted by: japanstarQuoteOriginally posted by: rmaxIt begs the question: why was this raised 2 weeks ago in the press? It sounds very much as though the information was seeded prior to the official release. Or there was a leak, and that kicked somone at JP to find out what was going on.This is called "crisis management" and you have consultancy companies specialized on how to bring to the public "bad news" in a way which will hurt you the less. It is very much used (especially in the US) by companies, politicians etc... In this particular case they clearly released the "bad news" in two steps to limit the damages. cmEDIT: TypoI think everyone's comfortable with what crisis/ media management is, but it's more interesting HOW it's been done.It appears to have been leaked first, which (unless it was planned) is often how these things finally get raised to senior management. When your CEO says, "I just read on Alphaville....." it is sometimes the first driver the business has had to get the issue investigated.I'm not trying to suggest a trader/ controller/ trade support employee gossiping with their mates outside of work can be classed as "whistle blowing", but it raises an interesting point to consider, would this story have been released right now if it hadn't been from industry rumours and gossip? In fact, would it even have been released?The other possibility put forward by MattF in particular, is that they DID know about this, and they chose to release the leaks last month.Both are valid possibilities. Personally, I think information travels outside of the bank faster than it travels up the bank, especially with the larger Tier 1's.
 
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ExSan
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JP Morgan- 2 billion trade loss

May 11th, 2012, 10:25 am

WSJ - J.P. Morgan's $2 Billion Blunder H - JPMorgan Chase Admits Big Losses On 'Egregious' Credit Trades WSJ - U.S. Stock Futures Hit by J.P. MorganBBC - JPMorgan reveals shock $2bn trading loss on investmentsDB - NYT - A Shock From JPMorgan Is New Fodder for Reformers
 
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chocolatemoney
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Joined: October 8th, 2008, 6:50 am

JP Morgan- 2 billion trade loss

May 11th, 2012, 10:42 am

My impression is that it takes to long to pile up that amount of shit, given the limited liquidity of that market.What happened to the regulators when they took a look at JPM's balance sheet in the aftermath of Lehman?Sloppiness?.. or am I missing something?
 
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rmax
Posts: 6080
Joined: December 8th, 2005, 9:31 am

JP Morgan- 2 billion trade loss

May 11th, 2012, 10:47 am

In this situations I am only ever reminded of Satyajit Das' Traders Guns and Money where if gives the equivalent Defcon conditions for a trading desk:DEFCON 5 Go to lunch. The noon bells have tolled "all is well".DEFCON 4 Business as usual. Normal indolence and lack of care continues.DEFCON 3 The smell test tells you that there is a problem. You ask a few questions being careful not to be told anything that you might regret in hindsight when seeking to avoid culpability.DEFCON 2 You learn that your traders have lost an unspecified amount of money from the various journalists who ring you for comment. You thank them for letting you know what is really going on.DEFCON 1 The bank is bankrupt. You're fired. You join the speaker circuit sharing your experiences with other risk luminaries such as Nick Lesson.Note this was written in 2007 so there are a few more on the speaker circuit nowadays. Perfect Storms
Last edited by rmax on May 10th, 2012, 10:00 pm, edited 1 time in total.
 
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trackstar
Posts: 26806
Joined: August 28th, 2008, 1:53 pm

JP Morgan- 2 billion trade loss

May 11th, 2012, 11:10 am

The Beltway Spin:JPMorgan's Dimon: Firm suffered $2B trading loss after "egregious" failure - Washington Post May 11May 11 (Bloomberg) -- "JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said the firm suffered a $2 billion trading loss after an "egregious" failure in a unit managing risks, jeopardizing Wall Street banks' efforts to loosen a federal ban on bets with their own money.The firm's chief investment office, run by Ina Drew, 55, took flawed positions on synthetic credit securities that remain volatile and may cost an additional $1 billion this quarter or next, Dimon told analysts yesterday. Losses mounted as JPMorgan tried to mitigate transactions designed to hedge credit exposure..."and echoing recent posts here:"...JPMorgan also changed how it calculates so-called value at risk, or VAR, a measure of how much the company estimates it could lose on securities on 95 percent of days. The company restated its VAR for the first quarter, previously disclosed at $67 million, at $129 million. The bank used a new model for calculating its trading risk in the first quarter that Dimon said was "inadequate." It is reverting to the old model."More on the link.**Rmax: Here is your Perfect Storms - Das linkYou have a ":" at the end of the URL that needs to be deleted.
Last edited by trackstar on May 10th, 2012, 10:00 pm, edited 1 time in total.
 
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rmax
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JP Morgan- 2 billion trade loss

May 11th, 2012, 12:10 pm

Much obliged and corrected!
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