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Gaussian Copula Kills Again?


Lisa Pollack, Alphaville, Two billion dollar ‘hedge’, here.  Looks like Pollack and Zerohedge conclude the London Whale position is in CDX tranches.

Concerning how one can make a $2bn loss on this, we have become convinced that it’d only be possible if the above was also done with tranches, which would seriously lever up any such position. Several FT Alphaville commenters have alluded to this already — thank you, guys. Even then, a $2bn loss is a lot to chalk up. But if it isn’t that, what else could it be?

Zerohedge, Is The Pain Over For Bruno Iksil? here.

Today, for the first time since the advent of the JPM prop trading fiasco last Thursday, the IG9-10 Year skew has diverged, dipping from -3 bps to -5 bps as the index remained flattish while the intrinsics widened by about 2 bps. While hardly earthshattering, this move likely means that either JPM’s CIO trading desk is playing possum and is no longer unwinding its original pair trade exposure (either because it no longer has anything to unwind, or because it can’t take the pain any more and is out of the market entirely), or the hedge fund consortium has had enough of pushing IG 9 wider in hopes that max pain would force JPM to cover its synthetic leg. As a reminder, this is where last Thursday we said the time to push JPM would likely end. As for the question of how much additional P&L loss JPM has sustained from Friday through today is a different matter entirely, and we are confident the next announcement from JPM will come momentarily, coupled with the announcement that Bruno Iksil, the last remnant of the CIO desk, and now having completed his duty of unwinding the trade that brought so much pain for Jamie Dimon, has been retired.


1 Comment

  1. […] go OK with that FPGA  Gaussian Copula code the London Whale needed to manage his positions ( see Gaussian Copula Kills Again?). A nine-year-old Scottish girl who attracted two million readers to a blog documenting her school […]

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