John Rusnak was bullish
on the yen. He thought the yen took all the damage it could following the
bursting of the Japanese bubble. He believed it would appreciate against the dollar. Under these circumstances,
traders would buy forward contracts to get yen for cheaper than its market
value, as well as hedge the position with a combination of put and call
options. He was so bullish on the yen that he ignored hedging his forward contracts.
His luck held until a series of policy changes in Asia culminated in crisis on
the Asian market and prompted a long slide in the value of the yen and other
his new account, he amplified the extent of his trades and kept his losses unseen
by using options and a higher level forex contract called a historical rate
rollover. This permitted him to hold off recognizing his losses, while still
betting more on the yen. This meant that the total value of the forex
operations at Allfirst was growing. Even though the losses were barely noticeable,
the increasing amount of capital being tied up in the currency market was noticeable.
revealed a staggering loss of $691 million. Allfirst and its parent bank Allied
Irish hoped that Rusnak was party to a grander conspiracy to fleece the bank
for profit, but Rusnak had not earned anything above his regular salary and
bonuses. Rusnak cooperated with the FBI and revealed how he had been able to
maneuver around the bank’s loose restrictions. Rusnak’s transparency with the
FBI hurt Allfirst because it had no one to blame but its own permissive
policies. Of course, shareholders took the bank to task over the matter. Allied
Irish’s stock fell sharply, but it proved more robust than Barings had been
after the Nick Leeson scandal. John Rusnak was sentenced to seven and a half
years in prison and fined $1 million. (Beattie, 2017)
learn from the more experienced and interact with trading talents. Observing
veteran traders allows you to understand their decision-making and thought
processes with regard to trading decisions.
has floated one of the banks whose collapse helped push the country to an
international bailout, marking a milestone in the country’s economic turnaround.
The government raised at least €3bn in the IPO
of Allied Irish Banks, which valued the group at €12bn. The offering was priced
at €4.40 per share. The €12bn valuation was in the middle of the bank’s
previously announced price-range, and in line with analyst expectations.
Ireland’s government will still hold between 71%
and 75% of AIB’s shares after the sale, and expects to slowly sell down its
stake in the coming years. The government paid almost €21bn to rescue the bank
at the height of the financial crisis, but the government expects AIB to
increase in value further.
The bank says it has
already repaid €6.8bn of its €20.8bn bailout, through a combination of fees,
interest, dividends, the redemption of some instruments, and other payments.
Some experts in Ireland dispute the figures, pointing out that some of the
fees, like payments for a government guarantee, were not directly linked to the
bailout. They also cite the immeasurable knock on cost to Ireland of rescuing
AIB, since it helped push the country into a painful sovereign bailout. (Megaw, 2017)