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Essay / Research Paper Abstract
This 6-page paper discussses how Nick Leeson's trading practices ended up causing the failure of the Barings Group. Topics touched upon include the riskiness of futures trading, derivatives and lack of supervision on the part of Barings, SIMEX and OSE. Bibliography lists 2 sources.
Page Count:
6 pages (~225 words per page)
File: D0_MTleeson.rtf
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Unformatted sample text from the term paper:
this century-old financial company was shocking enough, what was even more shocking was that the demise had been caused by a 20-something trader by the name of Nicholas Leeson.
The story of how Leesons greed and overconfidence, combined with the volatility of derivative trading and the futures markets, as well as the
inability of Barings to keep track on what its star trader was doing makes an interesting case study of how not to handle risky ventures such as currency trading on
international markets. In this paper, we will examine how Leeson was able to bring down the Barings Group, with particular focus on
the risks of financial instruments in which Leeson was involved, as well as the fact that Leesons bosses simply were not paying attention to what he was doing.
Before continuing with this paper, we need to review the fact that the Leeson case involved two trading markets - the Nikkei-225 and futures
contracts listed on the Osaka Securities Exchange and the Singapore Monetary Exchange, known as SIMEX. What was traded - and the risks
As he has been pointed out in much of the financial media that has covered this issue, the derivative instruments that ended up causing Barings downfall was the Nikkei 225
futures contract (Hoon et al, 1995). In its simplest sense, investing in futures means that the person putting up money is assuming that good things will happen in the
future on a specific date either to a particular stock, commodity or in this case the stock exchanges. Another area
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