FROM THEORY TO MALPRACTICE: LESSONS LEARNED

Laurent L Jacque

Chapter 18 in Global Derivative Debacles:From Theory to Malpractice, 2015, pp 309-325 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The collective wisdom of the financial services industry should make the conclusions of this book redundant. The lessons of each derivative debacle were all self-evident and yet “Plus cela change plus c'est la même chose”: the name of the derivatives and techniques involved have changed and multiplied over the years while the debacles grew significantly larger but the same prudential principles which guide the wise management of financial activities in both financial and non-financial firms continue to be ignored or violated: from the rogue trader's $8 million loss at the Citibank's branch in Brussels in the mid-1960s to SoGen's $7.2 billion blowout and AIG's $150 billion bailout in 2008 it is déjà vu all over again …. This chapter consolidates the many lessons learned from the perspectives of non-financial firms, financial institutions, regulatory agencies and investors.

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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