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Global Derivative Debacles: From Theory to Malpractice: 2nd Edition

Amazon.com Price:  $45.60 (as of 12/05/2019 17:38 PST- Details)

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Description

This book analyzes in depth all major derivatives debacles of the last half century including the multi-billion losses and/or bankruptcy of Metallgesellschaft (1994), Barings Bank (1995), Long Term Capital Management (1998), Amaranth (2006), Société Générale (2008) , AIG (2008) and JP Morgan-Chase (2012). It unlocks the secrets of derivatives by telling the stories of institutions which played in the derivative market and lost big. For a few of these unfortunate organizations it used to be daring but improper financial engineering which brought them havoc. For others it used to be unbridled speculation perpetrated by rogue traders whose unchecked fraud brought their house down.

Must derivatives be feared “as financial weapons of mass destruction” or hailed as financial innovations which through efficient risk transfer are in reality adding to the Wealth of Nations? By presenting a factual analysis of how the malpractice of derivatives played havoc with derivative end-user and dealer institutions, a case is made for vigilance not only to market and counter-party risk but also operational risk in their use for risk management and proprietary trading. Clear and recurring lessons across the different stories in this volume call not only for a tighter but also “smarter” keep watch over system of derivatives trading and Must be of immediate interest to financial managers, bankers, traders, auditors and regulators who are directly or not directly exposed to financial derivatives.

The book groups cases by derivative category, starting with the most straightforward and building up to the most complex — namely, Forwards, Futures, Options and Swaps in that order, with applications in commodities, foreign exchange, stock indices and interest rates. Each chapter deals with one derivative debacle, providing a rigorous and comprehensive but non-technical elucidation of what happened.

What is new in the second one edition? A new chapter on JP Morgan-Chase’s London Whale, an in-depth discussion of credit-default swaps, and an update of the revamped regulatory framework with Basel 2.5 and Basel III against the backdrop of the Euro crisis, in conjunction with a revised and expanded discussion of the AIG debacle.

Readership: Economists; undergraduates and graduates majoring in finance, economics and business administration; professionals, financial managers and CPAs in the financial service industry.

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