Coupon Accepted Successfully!


Union Bank of Switzerland (UBS)

  • Losses between 1.1Bn and 1.4Bn from 1997-8
  • UBS held a large position in LTCM (40% direct, 60% Options)
  • Equity Derivatives team not scrutinized by Corporate Risk Team
  • Head of Analytics – compensation was in line with fund performance
  • Equity Derivative Losses due to:
  • Change in British Tax laws regarding valuation of long dated stock options
  • Large position in Japanese Bank Warrants (were not adequately hedged)
  • Correlation assumptions on long dated equity options was not in line with the rest of the market
  • Modeling Deficiencies

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