JPMorgan And The London Whale
For the exclusive use of Y. Chen
INS370
JPMorgan & the London
Whale
Photo: ALAMY
03/2014-6003
This case was written by Andrew Chen, INSEAD MBA July 2013, under the supervision of Claudia Zeisberger, Affiliate
Professor of Decision Sciences & Entrepreneurship and Academic Director of the Global Private Equity Initiative
(GPEI) at INSEAD. It is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.
Funding for this case study was provided by INSEAD’s Global Private Equity Initiative (GPEI).
Additional material about INSEAD case studies (e.g., videos, spreadsheets, links) can be accessed at cases.insead.edu. Copyright © 2014 INSEAD
COPIES MAY NOT BE MADE WITHOUT PERMISSION. NO PART OF THIS PUBLICATION MAY BE COPIED, STORED,
IN ANY FORM OR MEDIUM WHATSOEVER WITHOUT THE PERMISSION OF THE COPYRIGHT OWNER .
TRANSMITTED, REPRODUCED OR DISTRIBUTED
This document is authorized for use only by Yen Ting Chen in FInancial Markets and Institutions taught by Nawal Ahmed Boston University from September 2014 to December 2014.
For the exclusive use of Y. Chen
Introduction
“The market can remain irrational longer than you can stay solvent.”
Attributed to John Maynard Keynes
In the spring of 2011, JPMorgan Chase & Co. (JPM) found itself in a dire situation. The synthetic credit portfolio (SCP) of their Chief Investment Office (CIO) had grown tremendously in market value through the first quarter. While the SCP represented less than
1% of the bank’s total assets, it had grown to become more than half of the bank’s total risk.
To make matters worse, the portfolio was not behaving as they had expected in light of recent credit market moves.
By the end of March 2012, the SCP had suffered a mark-to-market loss of $719 million in the year to date. However, the CIO was unable to reduce their exposure by selling because they had become a big holder in the market. Any hint of a portfolio
INS370
JPMorgan & the London
Whale
Photo: ALAMY
03/2014-6003
This case was written by Andrew Chen, INSEAD MBA July 2013, under the supervision of Claudia Zeisberger, Affiliate
Professor of Decision Sciences & Entrepreneurship and Academic Director of the Global Private Equity Initiative
(GPEI) at INSEAD. It is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.
Funding for this case study was provided by INSEAD’s Global Private Equity Initiative (GPEI).
Additional material about INSEAD case studies (e.g., videos, spreadsheets, links) can be accessed at cases.insead.edu. Copyright © 2014 INSEAD
COPIES MAY NOT BE MADE WITHOUT PERMISSION. NO PART OF THIS PUBLICATION MAY BE COPIED, STORED,
IN ANY FORM OR MEDIUM WHATSOEVER WITHOUT THE PERMISSION OF THE COPYRIGHT OWNER .
TRANSMITTED, REPRODUCED OR DISTRIBUTED
This document is authorized for use only by Yen Ting Chen in FInancial Markets and Institutions taught by Nawal Ahmed Boston University from September 2014 to December 2014.
For the exclusive use of Y. Chen
Introduction
“The market can remain irrational longer than you can stay solvent.”
Attributed to John Maynard Keynes
In the spring of 2011, JPMorgan Chase & Co. (JPM) found itself in a dire situation. The synthetic credit portfolio (SCP) of their Chief Investment Office (CIO) had grown tremendously in market value through the first quarter. While the SCP represented less than
1% of the bank’s total assets, it had grown to become more than half of the bank’s total risk.
To make matters worse, the portfolio was not behaving as they had expected in light of recent credit market moves.
By the end of March 2012, the SCP had suffered a mark-to-market loss of $719 million in the year to date. However, the CIO was unable to reduce their exposure by selling because they had become a big holder in the market. Any hint of a portfolio