As we suggested back when the JPM whale trade was announced, the trade(s) was supervised by hopefully more than one risk manager, with the trades being that large. Bloomberg reports that Mr Iksil traded big size before, and was used to carry more VaR solo, than the bank in total. VaR or not, the question is most probably as, often in finance, “Did the bosses understand what kind of trades Iksil was putting on,( and what the closing cost would be)”? From Bloomberg.
Iksil’s value-at-risk, a measure of how much a trader might lose in one day, was typically $30 million to $40 million even before this year’s buildup, said the person, who wasn’t authorized to discuss the trades. Sometimes the figure, known as VaR, could surpass $60 million, the person said. That’s about as high as the level for the firm’s entire investment bank, which employs 26,000 people.
Investigators are examining how long senior executives knew about Iksil’s swelling bets at the chief investment office before losses approached $2 billion. One focal point is why the formula used to calculate Iksil’s VaR was altered early this year, cutting the reported risk by half. The change followed an internal analysis in late 2011 and was approved by top risk executives, said a person close to the bank. About the same time, half a dozen managers typically involved in such decisions moved to new jobs.
“If it was something that had that large an impact, it would have to be agreed to at the very-most-senior level within risk management,” probably including the bank’s chief risk officer, said Steve Allen, a former head of risk methodology for JPMorgan who retired in 2004. “You’re not going to make a change of that magnitude on the basis of one risk manager.”
Peter Tchir’s thoughts on the JPM news. Whatever happened or not, the whale has accumulated some rather big positions.
Well for once we don’t have to talk about Spain or Greece.
This is the end of synthetic CDO’s and may well be the end of CDS as an OTC product, but we have time to look at that later. There will be a lot of information and misinformation out there. For now, the key is what is this going to do for the markets. As best as I can tell, they were generally short High Yield risk. They were mostly short tranches, mostly in off the run, and had some curve trades on. Against that, they were generally long IG, mostly tranches, mostly IG9, and had some curve trades on. The positions, if we ever find out exactly what they were, are complex. At some level this disclosure has something to do with mark to model. Gp