Six Derivatives Mishaps

2370 Words Jun 13th, 2012 10 Pages
| FI475-Project Study | Six Derivatives Mishaps |

2012/5/8 |

Sumitomo (future contracts)
Background:
1996, Sumitomo Corporation was one of the top copper market makers in the world. During the over 10 years under Hamanaka, who was a genius charged on allegations that he could manipulate the price of the metal, Sumitomo lost at least $1.8 billion as a result of what it said were unauthorized trades, which then lost a third of its value on world markets in less than two months. The affair was a major scandal which is at times compared in magnitude to the Silver Thursday scandal, involving the Hunt family's attempt to corner the world's silver markets. It currently ranks in the top 5 trading losses in financial history.
Cause:
In this
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That means Amaranth was selling its energy portfolio to Citadel Investment Group and JP Morgan Chase.
Allied Irish Bank (foreign exchange & options)
Background:
Allied Irish Banks has been revealed as the recent suspected currency fraud that lost $691 million. Ireland's biggest bank is scrambling to restore confidence and has appointed an independent investigator to probe the possible fraud at its U.S. business Allfirst Treasury. Trader John Rusnak had lost about $750 million in unauthorized currency trading. Allied Irish Banks (AIB) said Rusnak's losses dragged the bank's net income down by 38 percent to 484 million ($424 million) 2001, from what would have been a record 997 million.
Cause:
Traders have multi-positions, authority is too large. The modern financial risk in the prevention and control of a basic principle, namely the financial function must be separated, so can monitor all the trade transactions to control. But what happened in AIB, made John Rusnak has chance to fraud. And poor managerial, financial and operational control systems, which enabled Rusnak to carry out unauthorized trading activities undetected by the top management. Financial responsibility is mess, the basic connection between counter and office is failure. Generally speaking, the counter responsible for trade, the office is through the charges of financial supervision and control.
China Aviation Oil (oil future & option)
Background:
China Aviation Oil was one of the 25

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