Case Studies

Twenty-two failures worth understanding, from Metallgesellschaft in 1993 to Credit Suisse in 2023 — each one a mechanism from the free catalogue taken to its conclusion, and many of them a position that was sound until it had to be funded.

22 products, each with a five-step lesson, a worked example and a bank of twelve questions.

Case Studies is part of the OTC Learn subscription; the 36 products the app shipped with are free.

• Metallgesellschaft, 1993 — The right hedge, on the wrong clock
• Bankers Trust and Procter & Gamble, 1994 — A cheaper loan that was really a sold option
• Orange County, 1994 — A conservative bond portfolio, borrowed three times over
• Barings, 1995 — One trader, both sides of his own desk
• Daiwa Bank, 1995 — Eleven years of losses, hidden by the man who kept the records
• Sumitomo copper, 1996 — One trader, a grip on world copper, and ten years of hidden losses
• Long-Term Capital Management, 1998 — Convergence trades, twenty-five times over
• Ashanti Goldfields, 1999 — Seven years of production, sold forward
• Enron, 2001 — Hedges against itself, and loans dressed as trades
• Allied Irish Banks and Allfirst, 2002 — Fake options, real losses, and rates the trader supplied himself
• Amaranth, 2006 — A spread trade too large to leave
• Société Générale, 2008 — Fictitious hedges, and a €4.9bn exit
• Lehman Brothers, 2008 — Nine hundred thousand trades, closed out at once
• AIG, 2008 — Protection that could not pay its collateral calls
• MF Global, 2011 — A broker’s bet on euro bonds, and its clients’ missing money
• The London Whale, 2012 — A hedge that grew into the market it was hedging
• The Swiss franc floor, 2015 — A guarantee withdrawn in a morning
• Archegos, 2021 — Five banks, one position, and none of them could see it
• The LME nickel squeeze, 2022 — A hedge that could not be delivered into
• The gilt LDI crisis, 2022 — Pension hedges that worked, and could not be funded
• Silicon Valley Bank, 2023 — Long bonds, unhedged, funded by deposits that could leave in a day
• Credit Suisse AT1 bonds, 2023 — Bondholders wiped out while shareholders were paid

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