Digging Deeper Into The JPMorgan Chase Loss
By Scott Rothbort: By now you should have heard that after the market closed yesterday, JPMorgan Chase (JPM) announced that the company lost about $2 billion on synthetic credit security investment trades taken on by its chief investment office in its London branch. Supposedly the loss was taken on poorly designed hedges in its credit risk portfolio. Let us accept that fact at face value. However, we need to dig a bit deeper. That digging needs to be done outside of JPMorgan Chase. Here is why.Over-the-counter derivatives are a zero sum game. I should know, I ran the Global Equity Swap business at Merrill Lynch for most of the 1990s and have taught courses in derivatives at Seton Hall University's Stillman School of Business on and off since 2002. In the unregulated over-the-counter derivative market, for every winner there is an equal and offsetting loser. The problem driving the 2007-2009 Credit CrisisComplete Story »
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