Yeah, the guys from the big short... They were rogue- almost all got close to being shutdown.
"Rogue" traders who made billions...?
- Thread starter pinetboltz
- Start date
This is the good answer. Not all of them, only the doctor with the disability. He went from picking stocks to negotiating and selling derivatives that didn't even exist before, against his investors' wish. He fits the definition, he stuck to his guns and won big at the end.
"In experiments at universities in Tel Aviv, Stockholm and Michigan, Kahneman and Tversky set groups of people a series of tests. In one, they asked them whether, given a choice of gaining 450 units of the local currency, they would settle for that or take a 50-50 gamble on winning 1,000. Mathematically, the average gain was 500 – more than the 450 – yet the subjects were overwhelmingly risk averse. They chose the safe gain rather than the risky bet.
The psychologists then reversed the experiment (and a series of related ones) by offering the subjects a choice either of settling for a definite loss of 450, or taking a 50-50 gamble on losing 1,000 or losing nothing. This time, they rejected the definite loss for a half-chance of escaping unscathed. Like other animals, they started to gamble.
In his Nobel lecture, Kahneman argued that Bernoulli had failed to recognize the “reference point” in people’s financial choices. What matters most of all is not how much a gamble alters their wealth, but where they start – whether they are already satisfied, or have suffered loss. Their overriding trait is their inability to accept loss: they struggle instinctively – irrationally, in economic terms – to evade it."
The psychologists then reversed the experiment (and a series of related ones) by offering the subjects a choice either of settling for a definite loss of 450, or taking a 50-50 gamble on losing 1,000 or losing nothing. This time, they rejected the definite loss for a half-chance of escaping unscathed. Like other animals, they started to gamble.
In his Nobel lecture, Kahneman argued that Bernoulli had failed to recognize the “reference point” in people’s financial choices. What matters most of all is not how much a gamble alters their wealth, but where they start – whether they are already satisfied, or have suffered loss. Their overriding trait is their inability to accept loss: they struggle instinctively – irrationally, in economic terms – to evade it."
Before Nick Leeson there was Danny Dattel. After his first big authorized win his group was kind of rogue because they went over their limits regularly. In 1974 Bankhaus Herstatt liquidated their huge losing position during a West Germany-Yugoslavia soccer game, hoping that few people would notice. The CHIPS stopped functioning for several days.
http://www.oprisknorthamerica.com/d...ogue_Traders_and_Risk_Culture_-_Neil_Roth.pdf
Interesting part about Leeson: He was in the red by 521 millions when an external audit failed to find his secret account because he faked a fax, although he forgot to fake the sender, so it was Nick and Lisa, instead of a crediting bank.
Then he started his biggest trade yet, and that first went in his way, and was up 200 million. Had he stopped there Barings could have survived the 300 million loss.
http://www.oprisknorthamerica.com/d...ogue_Traders_and_Risk_Culture_-_Neil_Roth.pdf
Interesting part about Leeson: He was in the red by 521 millions when an external audit failed to find his secret account because he faked a fax, although he forgot to fake the sender, so it was Nick and Lisa, instead of a crediting bank.
Then he started his biggest trade yet, and that first went in his way, and was up 200 million. Had he stopped there Barings could have survived the 300 million loss.
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That worked, thanks. My kind of article, I actually hadn't read about the Finch experiment before so learned something new!
Reminds me of a CNBC interview with T. Boone Pickens several decades ago.
Young cubby reporter approached him and asked him about his billion dollar loss on oil.
T. Boone giving a withering look, obviously not happy with the question, being publicly accused of being a losing trader, then responded in his Okie drawl; (the quote is from memory and may not be exact)
"Yeah, that's right, I lost a billion on oil, but I made two billion on natural gas. How much money did you make last year?"
Young cubby reporter approached him and asked him about his billion dollar loss on oil.
T. Boone giving a withering look, obviously not happy with the question, being publicly accused of being a losing trader, then responded in his Okie drawl; (the quote is from memory and may not be exact)
"Yeah, that's right, I lost a billion on oil, but I made two billion on natural gas. How much money did you make last year?"
thanks for posting, makes for good weekend reading
interesting tidbit, you have to wonder why he didn't stop there, if he did that would have made him a hero / golden parachute to launch a hedge fund, etc
some of this stuff is unreal:
"In one infamous incident in 1992, the Fed sent a team of auditors to inspect Daiwa’s trading desk. At Iguchi’s prompting, while the auditors’ attention was focused elsewhere, Iguchi and the other traders left the building. Then, stacks of cardboard boxes and office supplies were piled on top of the desks in the trading room, and all of the computers, monitors, and lights were turned off. When the auditors entered the room, they were told that it was just a storage room. The auditors were skeptical, but moved on."
"The irrational price movements on the copper market caught the attention of legendary short seller George Soros...A battle royale ensued... After several weeks, Sumitomo’s vast resources proved to be too much for even Soros to overcome, and Soros ceased his efforts, giving an impressive victory to Hamanaka."
as a side question, what kind of training do banks provide their traders with? eg. if some sort of highly specialized training is given with their proprietary techniques, shouldn't the traders be more skilled, relatively speaking?