Open Access. Powered by Scholars. Published by Universities.®
Articles 1 - 3 of 3
Full-Text Articles in Law
Jpmorgan Chase London Whale Z: Background & Overview, Arwin G. Zeissler, Rosalind Bennett, Andrew Metrick
Jpmorgan Chase London Whale Z: Background & Overview, Arwin G. Zeissler, Rosalind Bennett, Andrew Metrick
Journal of Financial Crises
In December 2011, the Chief Executive Officer and Chief Financial Officer of JPMorgan Chase (JPM) instructed the bank’s Chief Investment Office to reduce the size of its Synthetic Credit Portfolio (SCP) during 2012, so that JPM could decrease its Risk-Weighted Assets as the bank prepared to adopt the impending Basel III bank capital regulations. However, the SCP traders were also told to minimize the trading costs incurred to reduce Risk-Weighted Assets, while still maintaining the opportunity to profit from unexpected corporate bankruptcies. In an attempt to balance these competing objectives, head SCP derivatives trader Bruno Iksil suggested in January 2012 …
Jpmorgan Chase London Whale D: Risk-Management Practices, Arwin G. Zeissler, Andrew Metrick
Jpmorgan Chase London Whale D: Risk-Management Practices, Arwin G. Zeissler, Andrew Metrick
Journal of Financial Crises
JPMorgan Chase (JPM) prided itself on having the best risk-management practices in the financial industry, having survived the 2007-09 financial crisis in better shape than many competitors. Chief Executive Officer Jamie Dimon often spoke of the bank’s “fortress balance sheet.” A keen focus on risk management is vital to JPM’s longevity, as is the case with all highly leveraged financial institutions. However, the JPM Task Force that investigated the $6 billion 2012 London Whale trading loss concluded that risk-management practices at the bank’s Chief Investment Office (CIO), the unit in which the loss occurred, were given less scrutiny by senior …
Jpmorgan Chase London Whale B: Derivatives Valuation, Arwin G. Zeissler, Andrew Metrick
Jpmorgan Chase London Whale B: Derivatives Valuation, Arwin G. Zeissler, Andrew Metrick
Journal of Financial Crises
After consistently producing positive results through 2011, the JPMorgan Chase (JPM) traders who oversaw the bank’s Synthetic Credit Portfolio (SCP) grew alarmed by a consistent string of losses beginning in January 2012. (The SCP was maintained by JPM to help hedge default risk and was the source of the 2012 London Whale trading loss.) To minimize the losses reported to their superiors until such time that market prices hopefully turned in their favor, the SCP traders began valuing their largest derivative positions in a manner that was not consistent with Generally Accepted Accounting Principles (GAAP) and JPM policy. The fair …