Some financial companies are so big and so interconnected that pulling them out of the system would lead to the collapse of the system itself. Such firms were termed Too Big To Fail. Economists believe that if the TBTF’s feel they will be insulated against pressures of the market they will not self-regulate and resist […]
Case Studies
Case Study: Equity Derivative Losses at UBS
In 1997, United Bank of Switzerland lost heavily in the equity derivatives market, with estimated losses pegged between $400 and $700 million. It is said to have lost $700 million in long positions in LTCM (Long Term Capital Management). The UBS case speaks strongly for strong internal risk control measures and adherence to the same. […]
Chase Manhattan and their involvement with Drysdale Securities
Drysdale Government Securities traded in government securities in the secondary market. It had a capitalization of $20 million. They dealt with a relatively lesser known type of government securities called repos or repurchase and reverse repurchase agreements. Repurchase Agreements (Repos): Under repo transactions, the central bank (Fed in US) purchases securities with a promise that the […]
Case Study: Trading Scandal at Kidder Peabody
To cut a long story short; young man armed with an engineering degree from MIT and an MBA from Harvard Business School joins Kidder Peabody after working with Morgan Stanley and First Boston at age 33. He starts generating fabulous profits for his government bond desk (1991). By 1993, he was managing thirty billion dollars. […]
Bankers Trust Case Study
P&G like several other profitable companies was looking at ways to hedge itself from risk. They were also looking at methods at making small gains, where possible. In case the gains turned to be losses, since they were offset by the small gains. They did this by using plain swaps of fixed for floating rate […]
2012’s Big-Name Business Court Cases
Settling matters in court can be a costly and unpredictable game, and no more so than for the business elite. According to public findings, Apple and Google spent more on legal fees in 2011 than they did on R&D. Even the most powerful companies are unable to avoid finding themselves in legal hot water from […]
Bankgesellschaft Berlin Case Study – Credit Risk and Operational Risk
This article briefly discusses the losses incurred by Bankgesellschaft Berlin in 2001 which was one of Germany’s top 10 banks. The Case In the mid-1990s some of the key subsidiaries of the bank started making massive loans to property developers. It also set-up property-backed funds that offered generous guarantees to retail investors. In 1999, the […]
Northern Rock: A Case in Low Frequency High Impact Event
In 2007 Northern Rock experienced a bank run, the first since 1886 by its depositors. The bank saw a withdrawal of 3 billion pounds which constituted about 11% of Northern Rock’s retail assets. It had to ask the Bank of England to intervene to save it. It eventually was taken over by Bank of England […]
Case Study: Taisei Marine and Fire Insurance
The Taisei Marine and Fire Insurance (TMFI)company along with Nissan Fire & Marine and Chiyoda Fire & Marine Insurance was part of the Fortress Re pool. Fortress Re was responsible for inward reinsurance business. TMFI had large property and casualty business in Japan. TMFI was Japan’s 15th in the list of top non-life insurers. TMFI’s […]
China Aviation Oil – Derivative Losses
China Aviation Oil (Singapore) Corporation Ltd (“CAO”) is the largest physical jet fuel trader in the Asia Pacific region and the key supplier of imported jet fuel to the PRC civil aviation industry. CAO’s key businesses include jet fuel supply and trading, trading of other oil products and investments in oil-related assets. Incorporated in Singapore on 26 May 1993, CAO […]