Risk Magazine article: How B2.5 beached the London Whale

polysena · Post by **polysena** » Wed Oct 31, 2012 10:03 am

I have been disapointed recently by RM articles in that after a deeper /second reading they do not pass the litmus test. The one above seems to be of the same kind.

I have a good understanding of the regulatory aspects that are mentionned and find the phrasing vague and confusing and borderline (to be nice) wrong- calendar implementations of CRM do not correspond . discussion around IRC makes no sense and and and..

And this not a very good sign because regulatory rules are not finally that complicated- they are just like a codex that you have to learn to read (boring aspect) and then use swiftly..

Much less so is conceiving trading strategies..where I still have very little to virtually no "understanding". If some of the "NP-structured credit trading wizards" has read the cited article, would they care to comment whether on that aspect there is something slightly more solid or is this low quality?

I am interested finally in their claimed assertion "you can pile more risk than it looks like if your objective is "min RWA".. I believe the article forgets a number of things.. but since I cannot reasonnably figure out whether the exposition of the alleged strategy makes sense.. I am not able to accept or reject that assertion as "noise" article again and should they have a point notwithstanding a lot of poorly stated or wrong arguments.. I do not want to miss it.

Risk Magazine Oct 2012 article: How B2.5 beached the London Whale

Cheng · Post by **Cheng** » Wed Oct 31, 2012 10:27 am

Can you post or send an electronic copy ? Some nasty people used to say that Risk Magazine is the Sun for quants Cool .

pj · Post by pj » Wed Oct 31, 2012 10:53 am

check your mail, Cheng.

polysena · Post by **polysena** » Wed Oct 31, 2012 11:04 am

okay I was wondering how to provide the article, given property rights and so on.. I would have scanned it because only have a paper version right now.. pj seems to have the pdf version.. spasibo pj!

pj would you then send it to me also so that I can provide it to other potential "NPers" in case.. outside the great Cheng whom one really can count upon- Danke .

Poly

Cheng · Post by **Cheng** » Wed Oct 31, 2012 11:29 am

Blush

I will have a look over the coming long weekend.

Cheers

granchio · Post by **granchio** » Wed Oct 31, 2012 11:52 am

if you have a mom could you please email it to me as well? I'll skim in the w/e though I suspect I won't be able to contribute much

pj · Post by pj » Wed Oct 31, 2012 11:58 am

it's not a .pdf so solly

cordura21 · Post by **cordura21** » Wed Oct 31, 2012 12:19 pm

EDIT: removed link to article.

Sorry, I didn't know the magazine complained in the past about posting links to their articles. I thought that since it is available on their site without any password it was meant to be read publicly.

polysena · Post by **polysena** » Wed Oct 31, 2012 12:31 pm

Cordura21

yes.... I understand RM or some other review have reproached in the past, that posting on NP is undermining the selling of expensive subscription ... I have saved the pdf article and thus can send it along to people interested in reading and perhaps contributing.. and you might edit your post and "erase your nice link" ${L_SMILIES_SMILE}$ but many thanks Poly

Thus since I have thanks to Cordura21 an easy to transport version -PDF- now just ask me.

thanks in advance for those who propose to contribute and then if there is interest/appetite that I detail the issues around reg. stuff I would

Poly

Cheng · Post by **Cheng** » Sun Nov 04, 2012 3:51 pm

I went through the article. As expected not much news, though. JPM set up a curve trade, long the long end, short the short end, probably using index CDS on CDX IG S9 (since the article mentioned tranches at one point it could also have been index tranches). If the curve steepens they get cooked which is basically what happend.

What I don't understand is how you get RWA relief under the CRM here, be it index swaps or tranches. My understanding was that CRM should kill structured credit once and forever, but it seems like the regulators missed some of the finer points.