Financial Innovation of Mass Destruction—The Story of a Countrywide FX Options Debacle

Anna Sławik and Joanna Bohatkiewicz-Czaicka
Additional contact information
Anna Sławik: Institute of Economics, Finance and Management, Jagiellonian University, ul. Prof. S. Łojasiewicza 4, 30-348 Kraków, Poland
Joanna Bohatkiewicz-Czaicka: Institute of Economics, Finance and Management, Jagiellonian University, ul. Prof. S. Łojasiewicza 4, 30-348 Kraków, Poland

Risks, 2022, vol. 10, issue 2, 1-17

Abstract: Astonishingly little attention has been paid in academic literature to the 2008–2009 foreign exchange (FX) options debacle in Poland, the scale of which was unheard of. It affected not only an individual organization but a significant part of economy, being an example of a situation in which operational risk at the company level could have impacted systemic risk. The research provides evidence of the dark side of financial innovations through an analysis of a countrywide case on an emerging market, utilizing a primary qualitative content analysis (QCA) of over 750 documents (including press releases, public authorities’ accounts, and corporate statements). It documents that the FX options debacle was caused by financial institutions which shrouded some aspects of innovative securities or took advantage of information asymmetry to exploit uninformed clients. The study concludes that both adequate legal regulations and proper operational risk management are crucial to avoid similar corporate failures.

Keywords: derivatives debacle; financial innovation; FX options (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.mdpi.com/2227-9091/10/2/28/pdf (application/pdf)
https://www.mdpi.com/2227-9091/10/2/28/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:10:y:2022:i:2:p:28-:d:732416

Access Statistics for this article

Risks is currently edited by Mr. Claude Zhang

More articles in Risks from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().