SOCIÉTÉ GÉNÉRALE

Laurent L Jacque

Chapter 11 in Global Derivative Debacles:From Theory to Malpractice, 2015, pp 179-196 from World Scientific Publishing Co. Pte. Ltd.

Abstract: On January 24, 2008 at 8 am (Paris time) Société Générale (SoGen) announced in a terse press release that it had been the target of a fraud amounting to the modest amount of €4.9 billions ($7.2 billions). Ironically, the mother of all derivatives debacles had hit SoGen's equity trading desk—its inner sanctum for which the bank was most admired. Trading in SoGen's stock was suspended while the international financial community reeled in disbelief. A young trader Jerôme Kerviel was accused of building mammoth positions in stock index futures which he had hidden through fake offsetting trades. How could a junior trader fool the control systems of one of the most sophisticated bank? Why did he do it? Or was Kerviel made a convenient scapegoat for SoGen's acquiescence of one of its traders' reckless but highly profitable trades. The saga of wild speculation cloaked in deceit of what soon became “l'affaire Kerviel” is recounted next.

Keywords: Derivatives; Debacles; Options; Swaps; Futures; Forwards; Financial Engineering; Market Manipulation; Rogue Traders; Speculation; London Whale (search for similar items in EconPapers)
Date: 2015
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