SERVING THE QUANTITATIVE FINANCE COMMUNITY

• 1
• 2
• 3
• 4
• 5
• 9

daveangel
Posts: 17031
Joined: October 20th, 2003, 4:05 pm

### JP Morgan- 2 billion trade loss

QuoteOriginally posted by: listDave my conclusion was based interpretationLet A be 1 unit of risky assets and be a hedge assets. At the end thee lost1 A+H2 A and other assets D3 they lost 2 units other assets Dwhatever
knowledge comes, wisdom lingers

chocolatemoney
Posts: 322
Joined: October 8th, 2008, 6:50 am

QuoteOriginally posted by: daveangelQuoteOriginally posted by: edouardis $2B that much? i was said the floor in question makes$4B/month and that the reserves of the bank are big enough to cope without any problem.if you were told that and you believed it then I have a car for you. Just one careful lady vicar own and less than 10,000 miles ont he clock. Yes, JPM will be fine after this loss. They are not some shaky French bank. JPM make $4b a quarter not a month and its not all made on one "floor". Second, it looks bad for banks that have been resisting Volcker.I would also add that reserves, in any case, need refills. tagoma Posts: 18265 Joined: February 21st, 2010, 12:58 pm ### JP Morgan- 2 billion trade loss QuoteOriginally posted by: chocolatemoneyQuoteOriginally posted by: daveangelQuoteOriginally posted by: edouardis$2B that much? i was said the floor in question makes $4B/month and that the reserves of the bank are big enough to cope without any problem.if you were told that and you believed it then I have a car for you. Just one careful lady vicar own and less than 10,000 miles ont he clock. Yes, JPM will be fine after this loss. They are not some shaky French bank. JPM make$4b a quarter not a month and its not all made on one "floor". Second, it looks bad for banks that have been resisting Volcker.I would also add that reserves, in any case, need refills.it was the question of someone in the not-in-the-banking-industry-SMB world. $1B,$10B, $100B are but meaningful at my level.i'm glad i get a new car , today. thank you to the old wise woman.btw thank you for your comments. Last edited by tagoma on May 13th, 2012, 10:00 pm, edited 1 time in total. hayes Posts: 1181 Joined: July 18th, 2008, 11:24 am ### JP Morgan- 2 billion trade loss QuoteOriginally posted by: daveangelQuoteOriginally posted by: edouardis$2B that much? i was said the floor in question makes $4B/month and that the reserves of the bank are big enough to cope without any problem.if you were told that and you believed it then I have a car for you. Just one careful lady vicar own and less than 10,000 miles ont he clock. Yes, JPM will be fine after this loss. They are not some shaky French bank. JPM make$4b a quarter not a month and its not all made on one "floor". Second, it looks bad for banks that have been resisting Volcker.Stop talking about the "Volcker Rule" thing and tell me more about this fantastic car you're selling.....

daveangel
Posts: 17031
Joined: October 20th, 2003, 4:05 pm

QuoteOriginally posted by: hayesQuoteOriginally posted by: daveangelQuoteOriginally posted by: edouardis $2B that much? i was said the floor in question makes$4B/month and that the reserves of the bank are big enough to cope without any problem.if you were told that and you believed it then I have a car for you. Just one careful lady vicar own and less than 10,000 miles ont he clock. Yes, JPM will be fine after this loss. They are not some shaky French bank. JPM make $4b a quarter not a month and its not all made on one "floor". Second, it looks bad for banks that have been resisting Volcker.Stop talking about the "Volcker Rule" thing and tell me more about this fantastic car you're selling..... the only negative on the car is that is a Citroen. knowledge comes, wisdom lingers tagoma Posts: 18265 Joined: February 21st, 2010, 12:58 pm ### JP Morgan- 2 billion trade loss QuoteOriginally posted by: daveangelQuoteOriginally posted by: hayesQuoteOriginally posted by: daveangelQuoteOriginally posted by: edouardis$2B that much? i was said the floor in question makes $4B/month and that the reserves of the bank are big enough to cope without any problem.if you were told that and you believed it then I have a car for you. Just one careful lady vicar own and less than 10,000 miles ont he clock. Yes, JPM will be fine after this loss. They are not some shaky French bank. JPM make$4b a quarter not a month and its not all made on one "floor". Second, it looks bad for banks that have been resisting Volcker.Stop talking about the "Volcker Rule" thing and tell me more about this fantastic car you're selling..... the only negative on the car is that is a Citroen.A Citroen car? Gosh! I must be damned

daveangel
Posts: 17031
Joined: October 20th, 2003, 4:05 pm

### JP Morgan- 2 billion trade loss

QuoteA Citroen car? Gosh! I must be damnedmust you ?
knowledge comes, wisdom lingers

rmax
Posts: 6080
Joined: December 8th, 2005, 9:31 am

### JP Morgan- 2 billion trade loss

QuoteOriginally posted by: edouardis $2B that much? i was said the floor in question makes$4B/month and that the reserves of the bank are big enough to cope without any problem.With DA a little. I know that some desks to have spectcular monthly gains, but often they are followed by spectacular monthly losses...

Posts: 23951
Joined: September 20th, 2002, 8:30 pm

### JP Morgan- 2 billion trade loss

QuoteOriginally posted by: exneratunriskI am not a practitioner and not experienced in trading at all. But I am surprised that some practitioners in renowned financial institutions seem to believe that volume is a kind of information thats "semantic" can drive markets into directions it suggests. The meta-information ("about the Whale") in the last 2 weeks alone might have interfered ......? But in general, in evolutionary systems (complexity economy) such determination is impossible.The rationale is two-fold. First, on a supply-and-demand basis, a whale must attract new entrants to a market in order to build a massive new position on top of the normal volume of open interest present in that market. For every new contract sought by the whale, some new capital must be attracted to take the other side. That changes the prices.Second, on a game-theoretic basis, if a non-whale knows that a whale exists and that this whale might be forced to unwind a big position (due to contract roll, margin call, risk management, etc.) then the non-whale will set their price . To the extent that the whale lacks optionality in their trading (e.g., the whale must sell) and the other market participants have optionality in their trading (e.g., the non-whale are free to buy or not buy), the whales contracts are worth less than the long-term expectation of the contracts. Any non-whale or other market participant who believes that a whale is being forced to sell will sit on the sidelines while the whale grows more and more desperate.

exneratunrisk
Posts: 3559
Joined: April 20th, 2004, 12:25 pm

### JP Morgan- 2 billion trade loss

QuoteOriginally posted by: Traden4AlphaQuoteOriginally posted by: exneratunriskI am not a practitioner and not experienced in trading at all. But I am surprised that some practitioners in renowned financial institutions seem to believe that volume is a kind of information thats "semantic" can drive markets into directions it suggests. The meta-information ("about the Whale") in the last 2 weeks alone might have interfered ......? But in general, in evolutionary systems (complexity economy) such determination is impossible.The rationale is two-fold. First, on a supply-and-demand basis, a whale must attract new entrants to a market in order to build a massive new position on top of the normal volume of open interest present in that market. For every new contract sought by the whale, some new capital must be attracted to take the other side. That changes the prices.Second, on a game-theoretic basis, if a non-whale knows that a whale exists and that this whale might be forced to unwind a big position (due to contract roll, margin call, risk management, etc.) then the non-whale will set their price . To the extent that the whale lacks optionality in their trading (e.g., the whale must sell) and the other market participants have optionality in their trading (e.g., the non-whale are free to buy or not buy), the whales contracts are worth less than the long-term expectation of the contracts. Any non-whale or other market participant who believes that a whale is being forced to sell will sit on the sidelines while the whale grows more and more desperate.Thank you, T4A!

list
Posts: 2041
Joined: October 26th, 2005, 2:08 pm

### JP Morgan- 2 billion trade loss

is the whale is something that is also usually called bubble years ago.

rmax
Posts: 6080
Joined: December 8th, 2005, 9:31 am

### JP Morgan- 2 billion trade loss

QuoteOriginally posted by: listis the whale is something that is also usually called bubble years ago.IMHO: A bublble is assets being overpriced (T4A can give an essay on the reasons why)IMHO: A whale is somone who is sitting on a large position that is in danger of being beached

Posts: 23951
Joined: September 20th, 2002, 8:30 pm

### JP Morgan- 2 billion trade loss

QuoteOriginally posted by: rmaxQuoteOriginally posted by: listis the whale is something that is also usually called bubble years ago.IMHO: A bubble is assets being overpriced (T4A can give an essay on the reasons why)IMHO: A whale is somone who is sitting on a large position that is in danger of being beachedExactly!I would slightly modify the definition of a bubble to also include a high breadth of ownership of the overpriced asset. If a whale inflates the price of an asset, but few other market participants join the same side as the whale, then the asset might be overpriced, but there really is no bubble in the same sense of Tulipmania, the dot-com bubble, or the housing bubble. Bubbles imply a broader, systemic exposure to the overpriced asset and more widespread damage when the bubble pops. Although it is certainly possible for a whale's failure to create a risk of a more systemic financial collapse (e.g., see LTCM), healthy institutions and financial systems should be able to absorb a whale's failure with little wide-spread or long-term damage (e.g., see LTCM again).A bubble is when your taxi driver, barber, and mother-in-law recommend you buy X.

list
Posts: 2041
Joined: October 26th, 2005, 2:08 pm

### JP Morgan- 2 billion trade loss

thanks rmax, and whether we can expected the similar endpoint for bubble and whale due to negative scenario?

rmax
Posts: 6080
Joined: December 8th, 2005, 9:31 am

### JP Morgan- 2 billion trade loss

I think Whale like scenarios only have an impact for the beach that the whale ends up sitting on when the tide goes out (beach = firms / tide = market). Hence unless there is a HUGE position then I don't think that the markets move that much on a macro basis. I seem to recall there was some weirdness going on prior to the SocGen issues, but it was more micro in nature. Bubbles are because an entire class of asset is overpriced, hence tends to move whole markets as everyone is on the flight quality, or if there is no quality everyone is on the flight to Rio.