Chapter 36 Derivatives Mishaps and What We Can Learn from Them

Since the mid-1980s there have been some spectacular losses in derivatives markets. The biggest losses have come from the trading of products created from residential mortgages in the US and were discussed in Chapter 8. Some of the other losses made by financial institutions are listed in Business Snapshot 36.1, and some of those made by nonfinancial organizations in Business Snapshot 36.2. What is remarkable about these lists is the number of situations where huge losses arose from the activities of a single employee. In 1995, Nick Leeson’s trading brought a 200-year-old British bank, Barings, to its knees; in 1994, Robert Citron’s trading led to Orange County, a municipality ...

Get Options, Futures, and Other Derivatives, Ninth Edition now with the O’Reilly learning platform.

O’Reilly members experience live online training, plus books, videos, and digital content from nearly 200 publishers.