London Whale Article
The main purpose of this report is to expose the findings and misconduct of disclosing important information of the JPMorgan Chase Whale Trades. This report explicitly details the negligence by the Chief Investment Office in misleading the Office of the Comptroller of Currency of their Synthetic Credit Portfolio. The author’s intention is to inform what went wrong with the trading in the derivatives market by JPMorgan Chase.
The key question the author is addressing is why the CIO deviated from their standard midpoint markings to later assigning more favorable prices. Also, the author is addressing why the OCC was unaware of the losses and the risk associated with the SCP.
The most important information in this article is the deceptive actions committed by the CIO in the London Whale Trades. It became apparent that senior managers downplayed the problems of the SCP and kept describing the portfolio as a risk-reducing hedge, when in actuality it was a massive portfolio losing billions of dollars and had stopped providing credit loss protection to the bank. The whale trades shows how financial institutions engage in high risk trading activities with federally insure deposits and attempted to divert attention from these synthetic derivatives.
The main conclusion s in this article is a combination of poorly executed hedging decisions by the CIO of JPMorgan Chase in their SCP. The CIO failed to alert its regulators of their actions in constructing this portfolio that was filled with complex high risk synthetic credit derivatives. JPMorgan Chase claimed that its SCP functioned as a hedge against bank credit risks, but failed to identify the assets being hedged, test the effectiveness of the hedging activity, or even show how it would lower bank risk. After breaching all five major risk limits on the SCP, JPMorgan ignored the warning signals and dodged OCC oversight. Ultimately, JPMorgan Chase hid over $660 million in losses and falsified information about
The key question the author is addressing is why the CIO deviated from their standard midpoint markings to later assigning more favorable prices. Also, the author is addressing why the OCC was unaware of the losses and the risk associated with the SCP.
The most important information in this article is the deceptive actions committed by the CIO in the London Whale Trades. It became apparent that senior managers downplayed the problems of the SCP and kept describing the portfolio as a risk-reducing hedge, when in actuality it was a massive portfolio losing billions of dollars and had stopped providing credit loss protection to the bank. The whale trades shows how financial institutions engage in high risk trading activities with federally insure deposits and attempted to divert attention from these synthetic derivatives.
The main conclusion s in this article is a combination of poorly executed hedging decisions by the CIO of JPMorgan Chase in their SCP. The CIO failed to alert its regulators of their actions in constructing this portfolio that was filled with complex high risk synthetic credit derivatives. JPMorgan Chase claimed that its SCP functioned as a hedge against bank credit risks, but failed to identify the assets being hedged, test the effectiveness of the hedging activity, or even show how it would lower bank risk. After breaching all five major risk limits on the SCP, JPMorgan ignored the warning signals and dodged OCC oversight. Ultimately, JPMorgan Chase hid over $660 million in losses and falsified information about