Nick Leeson Case

Thomas Farrow had hubris problem long before he built up the Farrow bank. He was very vocal with what he thought of the banking sector and about the usury fees the banking system would charge the people, especially the “common” people. He was even asked to present evidence to the government about the usury fees. In order to help those less fortunate he started a bank

Options strategies share a similar defect with forward sales. That is the weakness of getting the maximum profits that are available when the price goes up or indeed has the potential to rise. “By adjusting the exercise prices and ratios of puts and calls, American Barrick could determine the degree to which it chose to participate in gold price sales”. However, options contracts are usually not longer than 5 years and only contracts with maturities under 2 years have high liquidity. Thus, the time spread of it is far shorter than the 20 years of expected production currently in reserve. Taking these factors into consideration, we think options contracts are good for American Barrick to hedge risk in short-term period.

Mr. Lee and the other executives expect to generate a higher profit from hedging since they have majority of their personal wealth invested into the firm. The focus of any hedging program should always be to minimize the firm’s risk of loss, but that does not mean the they will

According to an interview conducted by MarketWatch with London, he confessed that he was just thinking about trying to help out a friend. He thought what they were doing was small. He claimed he didn’t ever want anything. Nor did he know the volumes Shaw was trading at.

The significant finding from this article is that the world of finance is a very strange world. This world can offer opportunities to many, and at the same time, it can prove to be a mess for the others. Many people are not corrupt in their person, but by being negligent or by being careless, they fail at doing their duty successfully at some points in time. However, what the article talks about is the complete picture. Steven A Cohen faced a problem. He got entangled in an enormous financial mess.

The task force steering committee is made up of the Department of Justice, Department of the Treasury, Department of Housing & Urban Development (HUD), and the Securities and Exchange Commission (SEC). The investigators would also work with local authorities to “investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, address discrimination in the lending and financial markets and recover proceeds for victims.” (Justice News, 2008).

On July 2ed, former traders of Barclays are accused of manipulating the Libor interest, the standard rate of the interest for loans between financial institutions, to meet their own derivatives potions and make huge private profits. Their dishonest actions disrespected the customer’s rights and damaged the freedom of market. They behaved disloyally to the financial industry and failed to follow their moral values.

From my perspective, Sunbeam’s board made a wise decision in firing Al Dunlap, and it was an example of effective corporate governance as the decision stopped Dunlap to further impair tone at the top in Sunbeam and further generate agency cost within Sunbeam. According to SEC litigation release No. 17001, during Dunlap’s tenure in Sunbeam, Dunlap was involved in applying improper earning management such as channel stuffing and “cookie jar”

Although Jones’ original three tenets still have some relevance to the hedge fund industry, not all hedge funds maintain short positions

Established in January 1999, Pine Street Capital (PSC) was a market-neutral hedge fund that specialized in the technology field, facing market risk and trying to decide whether and which way to use in order to hedge equity market risk. They choose technology sector because the partners of PSC felt that they have enough ability to evaluate this sector and specially be good at picking out-performing stock. Short-selling of NASDAQ and options hedging strategy are the two major hedging choices for PSC. Either strategy has its own advantages in different economic periods and conditions. The fund has just through one of the most volatile periods in NASDAQ 's history, and it was trying to decide whether it should continue its risk management

The bank's main owner, Ramón Báez Figueroa, was accused of operating a secret “bank within the bank” by officials for more than ten years (Economist, 2003).

1. Why did Nick Leeson sell numerous short straddles for each long futures contract he bought?

You also need to understand how they were short, and how they were funding their short position).

Generally there is an enormous amount of information available to the traders. So in order to trade profitably traders should take only essential information into consideration for analysis. In this paper we trade a portfolio of options, namely 10 BHPC98 puts and 10 BHPC88 calls both with the same strike date and price as evidenced in Appendix B. The trading strategy we will employ is called a “long straddle” and is usually amenable to day traders owing to the availability of stop loss orders on the Commsec platform. Information such as companies’ circumstances, media announcements, public reports and historical data are all important information available to establish a trading profile and goals. For example, this trade works best when an imminent announcement is pending that increases implied volatility or impacts on the share price significantly. One such occasion would be a half year reports due out in February 2016. Thus, in the process of building the trade we distill our trading profile.

While Jones 's strategy focused on short selling and leverage, there are a variety of other