Courtesy of Lee Adler of the Wall Street Examiner
Official data from the US Federal Reserve have laid bare the eye-watering size of trading positions built up by JP Morgan’s chief investment office in synthetic credit indices, raising further questions about risk management standards at the bank.
According to the figures, JP Morgan’s position in investment-grade credit default swaps jumped eightfold from a net long of US$10bn notional at the end of 2011 to US$84bn at the end of the first quarter this year.
The Fed data support previous reports about the nature of the trading strategy that has led to the losses. In investment-grade CDS with a maturity of one-year or less, JP Morgan’s net short position rocketed from US$3.6bn notional at the end of September 2011 to US$54bn at the end of the first quarter. Over the same period, JP Morgan’s long position in investment grade CDS with a maturity of more than five years leapt five times from US$24bn to US$102bn (see chart).
via DERIVATIVES: Fed data expose US$100bn JP Morgan blunder | Capital City | IFRe.
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