Parsad Posted May 31, 2012 Share Posted May 31, 2012 The news gets worse and worse about what was happening at JPM under Iskil's trading. Just brutal! Shareholders should be rightly pissed about this. Cheers! http://www.bloomberg.com/news/2012-05-30/jpmorgan-cio-swaps-pricing-said-to-differ-from-investment-bank.html Link to comment Share on other sites More sharing options...
racemize Posted May 31, 2012 Share Posted May 31, 2012 ouch. I also don't understand the industry's reliance on VaR for risk... Link to comment Share on other sites More sharing options...
HJ Posted May 31, 2012 Share Posted May 31, 2012 Time to put some serious regulations on the credit derivative market or put it to bed! That market is nowhere near as deep as its participants claim to be, and nowhere near good enough for hedging any meaningful risks. It's always somewhat of an insider's game, with a handful of desks dominating the marks, and can basically twist the market whichever way suits them. When Goldman needed to do their subprime synthetic CDO, the "market" was shown to be at one level, but literally within weeks the market is dramatically lower. Secret? They cross $5MM notional of a similar instrument, and use that as the level to reference a $1 billion notional deal. At the time, they couldn't have moved 1/3 of that collateral in the cash market. When they needed AIG to pony up, the desk just mark things down to whatever level suits them. Except they did it to such an extreme that it literally freaked out the whole shadow banking system, causing a run. If JP Morgan had to move hundreds of billions of investment grade bonds in actual cash market, the world would have caught on long ago. What is a price in the so called CDS market, or the tranches is very fake. It becomes the tail that wags the dog, yet the regulator and senior management some how think that it's a good market! That world needs some serious adult supervision, or should just be shut down as suggested by Charlie Munger. Link to comment Share on other sites More sharing options...
lessthaniv Posted May 31, 2012 Share Posted May 31, 2012 ouch. I also don't understand the industry's reliance on VaR for risk... racemize, it's darn right scary. those nets are only good until a counterparty fails. then, all of a sudden things don't net anymore!! Link to comment Share on other sites More sharing options...
Parsad Posted May 31, 2012 Author Share Posted May 31, 2012 JPM is spinning out the "special investments" division. Not the source of the losses, but Dimon is taking an axe to past practices on the investment side. I think that's a good first step. Cheers! http://www.cnbc.com/id/47625053 Link to comment Share on other sites More sharing options...
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