Jp Morgan Chase Hit by $2 Billion Derivatives Loss
JPMorgan Chase & Co.
The 2012 Derivative Debacle
Table of Contents Company Overview 3 Derivative Debacle Overview 4 Events Leading Up to the Debacle 5 Credit Default Swaps and their Use 5 Why did JPMorgan Lose Nearly $6 Billion? 7 What Did we Learn from this Debacle? 9 Works Cited 11
Company Overview
JPMorgan Chase & Co. is the leading financial services firm in the world with operations in over fifty countries. It was founded and based in the United States where its corporate headquarters is located in New York City. It has six core businesses: Investment Banking, Retail Financial Services, Card Services, Commercial Banking, Treasury & Securities Services, and Asset Management (JPMorgan Chase & Co.).
This bank came to be JPMorgan Chase & Co. in 2000, when the Chase Manhattan Bank, originally founded in 1799, merged with J.P. Morgan & Co., originally founded in 1871. It also had many predecessors such as Chemical Bank, Bank One, and Manufacturers Hanover Trust Co. (JPMorgan Chase & Co.). Over the years, JPMorgan Chase & Co. played major roles in certain transactions and events. For example, this bank was involved in the First World War where it helped the British and the French by arranging a $500 million Anglo-French loan which was, at the time, the largest foreign loan in Wall Street history (JPMorgan Chase & Co.). It also supported the European Allies by becoming their purchasing agent. Furthermore, many of its predecessors helped revolutionize banking throughout the years. For instance, they introduced automated teller machines (ATM), helped in the formation of electronic banking networks, and helped pioneer the earliest forms of online home banking services (JPMorgan Chase & Co.). Moreover, there were key mergers and acquisitions that shaped the company. Some acquisitions include Bank One (2004), Washington Mutual (2008), and Bear Stearns & Co. Inc. (2008).
Although JPMorgan Chase &
The 2012 Derivative Debacle
Table of Contents Company Overview 3 Derivative Debacle Overview 4 Events Leading Up to the Debacle 5 Credit Default Swaps and their Use 5 Why did JPMorgan Lose Nearly $6 Billion? 7 What Did we Learn from this Debacle? 9 Works Cited 11
Company Overview
JPMorgan Chase & Co. is the leading financial services firm in the world with operations in over fifty countries. It was founded and based in the United States where its corporate headquarters is located in New York City. It has six core businesses: Investment Banking, Retail Financial Services, Card Services, Commercial Banking, Treasury & Securities Services, and Asset Management (JPMorgan Chase & Co.).
This bank came to be JPMorgan Chase & Co. in 2000, when the Chase Manhattan Bank, originally founded in 1799, merged with J.P. Morgan & Co., originally founded in 1871. It also had many predecessors such as Chemical Bank, Bank One, and Manufacturers Hanover Trust Co. (JPMorgan Chase & Co.). Over the years, JPMorgan Chase & Co. played major roles in certain transactions and events. For example, this bank was involved in the First World War where it helped the British and the French by arranging a $500 million Anglo-French loan which was, at the time, the largest foreign loan in Wall Street history (JPMorgan Chase & Co.). It also supported the European Allies by becoming their purchasing agent. Furthermore, many of its predecessors helped revolutionize banking throughout the years. For instance, they introduced automated teller machines (ATM), helped in the formation of electronic banking networks, and helped pioneer the earliest forms of online home banking services (JPMorgan Chase & Co.). Moreover, there were key mergers and acquisitions that shaped the company. Some acquisitions include Bank One (2004), Washington Mutual (2008), and Bear Stearns & Co. Inc. (2008).
Although JPMorgan Chase &
Cited: Abelson, D. K. (2012, May 25). JPMorgan Gave Risk Oversight to Museum Head With AIG Role. Retrieved from Bloomberg: http://www.bloomberg.com/news/2012-05-25/jpmorgan-gave-risk-oversight-to-museum-head-who-sat-on-aig-board.html Clark, J Deutsche Bank Research. (2009, December 31). Credit Default Swaps - Heading to a More Stable System. Retrieved November 25, 2012, from Deutsche Bank Research: http://www.dbresearch.com/PROD/DBR_INTERNET_EN-PROD/PROD0000000000252032.pdf Ehrenberg, R Henry, D., & Viswanatha, A. (2012, July 13). U.S. Investigates Whether JPMorgan Traders Hid Losses. Retrieved November 24, 2012, from Reuters: http://www.reuters.com/article/2012/07/13/us-jpmorgan-earnings-idUSBRE86C0G420120713 Horowitz, D Investopedia. (n.d.). Counterparty Risk. Retrieved November 25, 2012, from Investopedia: http://www.investopedia.com/terms/c/counterpartyrisk.asp#axzz2DI6siqBT ISDA CDS Marketplace Jakola, M. (2006, June 2006). Credit Default Swap Index Options. Retrieved November 25, 2012, from Northwestern University: http://www.kellogg.northwestern.edu/research/fimrc/papers/jakola.pdf JPMorgan Chase & Co Seligson, S. (2012, July 24). How Does a Bank Lose $5.8 Billion? Retrieved November 26, 2012, from Boston University Today: http://www.bu.edu/today/2012/how-does-a-bank-lose-billions/ Shorter, G., Murphy, E