JP Morgan Sigma events... … n-hit.html

I wonder how many sigmas this one is… … ket-losses

and … -went-bust

Some background from a month ago: … -bets.html

Some cowwobowation: … -loss.html

Jamie’s the best of them by a long shot.

The whale has beached … k-eye.html

From a cursory reading of the numerous articles cluttering the blogosophere about this, I can only conclude the lesson is, once again, that banks should not be involved in transactions that cannot be explained to their chief executives - and Dimon is not a stupid man - in a 15 minute briefing.

I’ve no doubt Dimon understands the instruments and strategies involved.

Could it be a case of JP knowingly taking a position that simply went against them ?

It looks like a prop trading desk play that was masquerading as a hedge. Due to its configuration (for legal reasons) they were boxed in and had limited options when then needed to rejig it when some of the numbers went against them. The rejig involved fairly illiquid instruments which tipped their hand to the other players who piled in for the kill. Also seemed that the risk models were wrong regarding downside. VaR strikes again. Potential pricing model losses of tens of millions turned into real losses of billions. By the time they realized just how big a hole the London desk had dug it was too late. Guess who’s not getting their bonus this year. It seems the Greeks did not know their greeks…

More details here…

and here…

JPM stock down 8% +.

Max doesn’t agree.

Er, right - chicken asked which fox they like the best…

Down 3%

Nice summary…

The zinger…

Interesting numbers…

So CIO not a minor unit. Which is why Dimon knew all about its ops even before its VaR blew out beyond the rest of the bank.

Sounds like the classic story of a position growing so large in a small market that any changes move the market. Which invalidates the first principal of all the math their pricing and risk models were based on. First, lets assume a perfectly efficient market… Once that happens things can go non linear very quickly with little notice.

When the other players worked out what was going on then it became a game of deepest pockets. Which JPM would have won if it had not been for all the pesky regulators. So oddly enough, a story of regulation working. Those who tried to bend the rules are out of a job. For the moment. And those who looked the other way while the setup happened are in for a very uncomfortable next few years. The investor class action law suits should be very interesting. … ou-so.html

How JPMorgan’s storm in a teapot grew: … abdc0.html #FT
Google for article. Very good

JPMorgan fiasco exposes the myth of the imperial CEO: … abdc0.html #FT

Obama yet again shows how he is a Wall St sellout
The guy has no interest in regulation of the banks.

That’s socialism for you!

best blow by blow of the train wreck so far for those who know their greeks and their kurtosis…

crushed by delta hedging it seems…

Another text book case of “when pricing models blow up”…


The problem looks less with the model equations breaking down than with the assumptions that went into finessing the numerical solutions of the equations no longer being valid. Very easy to overlook until its far too late to recover. So it soon became garbage in - garbage out. A bit like with the flight avionics software on the flight AF477 Airbus.

But surely you should be going out to bat for JP Morgan and James Dimon, the Great Defender of our Godly pristine capitalst system against the hordes of ne’er-do-well Occupy hippies and all that?

Anyway, a typically fawning profile from Fortune in 2006: … -jpmorgan/

You don’t have to read too closely between the lines to suss that the guy is a nasty bully. … TopStories