Enterprising Investor
Practical analysis for investment professionals

credit default swaps


JPMorgan Chase and the London Whale: Understanding the Hedge That Wasn’t

How exactly does one "hedge" a book of commercial loans — JPMorgan’s traditional banking business — by writing protection on other companies’ paper, thereby gaining loss exposure to these other loans? Here's why calling the trades complex, poorly monitored, and poorly understood is an understatement.


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