Rogue trader to cost SocGen $7bn

Quote from makloda:

I'm curious to learn what they could have done better.

a) Average down?
b) Call around trading desks for a quote on 100,000 DAX future and 100,000 ESTX fut. option puts (oh boy that would have been sth)?
c) Issue a press release "We're long to our necks in European futures and close to becoming illiquid and force liquidation. Please don't trade against us. Thank you."
More...

I am sure there are ways to unload a position correctly. first hedging it and then working it out over time. I am not an expert.

Figure that if they had called Atticus he could have saved them a couple bil...
 
I think at that size (~200k contracts, 5-8% of daily volume) in an already rapidly falling market (Nikkei + ASX were hit hard both Friday and Monday morning) things become less and less hedge-able. The #1 priority would be utmost secrecy and being as quick as possible rather than trying to save a couple million left or right. Wasting time could mean the difference between getting out alive or dead.

The SG folks said they used 1 trader and 1 trader only to unwind the position in order to limit risks of front running. Calling in big meetings and letting more and more people know of the situation would probably have caused rumors to slip out to other trading desks and they'd immediately start trading against SG (see LTCM's short volatility position 1998).
 
Who sez facts don't lie? If I'm not mistaken, facts can be cooked just as easily as the financial numbers that most of these companies excel at.

I think Kerviel is a fictitious character that SG made up only to cover their huge losses from the subprime crap. It's all fucking bullshit!
 
wait a little more as an 'error' account pops up.
Quote from Spooz Top:

that`s the other unusual part to this story as he stood to gain nothing...........as a trader,the first thing you ask is R/R......why risk without reward?
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Quote from saliva:
I think Kerviel is a fictitious character that SG made up only to cover their huge losses from the subprime crap. It's all fucking bullshit!
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Yea, right. Now SG looks so much smarter and 'professional' - being ridiculed everywhere - than their US counterparts that wrote down their subprime losses the old-fashioned way.

If you'd consider a cover up then you'd do it because you see a clear advantage doing so, not the opposite.
 
In our defence
The news this morning of the €5 billion rogue trading losses at SG has raised a lot of questions over the French bank's risk management. It's also drawn attention to the fact that the bank won Risk magazine’s equity derivatives house of the year award this year. The award was judged between September and December 2007, based on the business SG had done over the previous 12 months. Over this period they launched a number of products first, including a structure linked to the implied volatility smile on a basket of stocks. SG’s losses were due to fraud, apparently committed by a single person - and while the losses will (and should) put the spotlight on the bank's compliance, oversight and risk management, they should not condemn the entire equity derivatives team.
Keep checking Risk News for the latest in this developing story, including exclusive interviews and analysis.

Posted by Alexander Campbell on January 24, 2008 12:05 PM | Permalink
 
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