The world financial market where already under pressure from the Euro crisis, untill yesterday late night when the news broke out JPMorgan has trading loss of at least $2 bln, reputation hit . The CIO unit is where Bruno Iksil was making $200 billion-sized bets. Basically JPM has suffered massive losses at its CIO group most likely due to its IG/HY positions held by Iksil.
Below quotes from Mr Jamie Dimon
- “…Errors, sloppiness, and bad judgement.”
- “Bad strategy, badly executed and poorly monitored”
- “It could get worse. This could go on for a little bit.”
- “Badly executed, badly monitored. I’m not going to repeat it 800 times” View full article »
As I have been continuously posting on the Credit derivatives these days thought of sharing a post that I did early in 2008 when the face of Investment banking completely changed after sub-prime crisis.
There was an era when Investment banking (IB) was on the role … hefty packages, luxurious life, dream job for a financial student were some of the features of IB. Over the years evolved as a very big concept coined by the US, In India we use to call that as a merchant banking .
Goldman Sachs, Bear stern, Morgan Stanly, Lehman Brothers and Merrill Lynch were the 5 icons which use to shine at the wall street over the period of time. View full article »
As I am trying to communicate from my last post that the market for OTC derivatives is mammoth in size. I have tried to put my views in my past articles over OTC.Derivatives Central Clearning & Dodd – Frank .Central Clearning Of derivatives & Dodd – Frank continues… , Credit derivatives Cat bonds & Cat Swaps ,OTC derivative series CDS, Bonds and Basis Trade
I got the opportunity to read one of the recent paper on Reforming the OTC derivatives market by William C Dudley .
Dudley believes the pre-crisis OTC derivatives market needed reform. Let’e examine his case. View full article »
Ready or Not ? Here it comes
Lot of Hedge funds and Investment banks have started publishing the margin FAQ’s after the Credit crisis. As part of Dodd-Frank, by the end of 2012, all standardised over-the-counter derivatives will have to be cleared through central counterparties.
That’s the biggest challenge for the market as OTC derivatives account for almost 95% of the derivatives markets. In June 2011, the notional value of outstanding OTC derivatives was around $707 trillion or €540 trillion. View full article »
Takings from my last post A Prop Trader or Rogue Trader and my past posts on the same topic The Rogue Trader or The Rogue Banks and TO BE A ROGUE TRADER would like to share few more views over them. As I reveled in the past that prop trader don’t trade on behalf of clients but they use institution own money to trade.They speculate and their focus are is emerging markets.
The two principles on which they work :
- You need to be dispassionate about your trade, to control your internal hurdles that may attach you to it emotionally.
- You need to have specific knowledge of the asset you’re trading. You must have contacts in the asset’s country that can supply you with information that is open to anyone else (otherwise it’s insider trading) but that is still extremely valuable.
View full article »
People talk a lot about prop traders but many of them know and many don’t know about them. Last night I was reading an article in The Guardian an interview by Quant trader recalled my short experience that I lived as a Prop Trader.
We play with the money that’s the shortest version what a prop trader do.There are two kinds of traders in the financial institutions.
1) Market-makers use their client’s money to make money for those clients, taking a commission.
2) Then there are prop traders like me beg you pardon I was. We use cash given to us by the bank to make money for the firm. View full article »
The way derivatives have evolved over the years they attracted criticism along with the praise.Corporates continues to take advantage of leverage with them many went belly up and some made fortunes out of them.
Here are some of the Jargons these days the firms uses :
- Diversification : Lets do several things that we don’t know any thing about badly
- Sticking to the knitting or Focus : Lets get back to doing what we once did if any body can remember what it is and how it is to do it
Was going through Zerohedge and find some interesting facts the (TBTF) Too Big To Fail get Too Bigger To Fail. The top 5 banks of the world holds 97% approx $221 trillion derivative outstanding.
$220 trillion is more than enough for the world to collapse in a daisy chained failure of bilateral netting (which not even all the central banks in the world can offset).
Time and again history has repeated itself unregulated derivatives are prone to catastrophic failure. And yet, nearly four years after the crash, and nearly two years since the passage of the Dodd-Frank law, the multitrillion-dollars derivatives market is still dominated by a handful of big banks, and regulation is a slow work in progress. Unregulated derivatives are still an economic threat. That’s because derivatives have become deeply embedded in the global economy. ( an article from Ny times quoted) View full article »
I am a big fan of Traders Guns and Money the book written by Satyajit Das, the definitions Knowns and Unknowns revealed by him is the classic work. The reality is always to make sure that you have a sheat when the music in this game of musical chairs for high stakes stops ( referring to the examples for the crisis happened in the past). As a result of it some interesting statements the management of the firms make but the intensity is something to thought about :-
Statement: As a Leading dealer with a global platform, we are the major player in the market.
- Translation: We have spent a fortune to build this business and are now prepared to spend millions more subsidizing your requirements.
Statement: We have one of the most talented teams in this space.
- Translation: Our staff are vastly overpaid and on huge guaranteed bonuses.
View full article »
With the continuation of my last post some book rules for investments trying to reveal some of the structured products offered in the open economies of world amaze to see that more than 10 billions of structured products are sold every year :
- Reverse convertibles : They are unsecured short-term notes that are linked to the price of an underlying stock (typically not the stock of the issuer). The security comes with a high coupon rate (from 7 to as much as 25 percent). At maturity, the investor will receive the interest payment plus either 100 percent of his original investment amount or a predetermined number of shares of the underlying stock.
- An accumulator : This is one of the famous product in Asia. An accumulator is essentially a contract that obliges investors to purchase a security, currency or commodity at regular intervals at a fixed price. View full article »