Since it's managing state funds, the bank has taken a conservative approach to investing, largely avoiding the derivatives market troubles that have ensnared so many other financial institutions.
Formation of sharp boundary layers in numerical methods when ϵ, the coefficient of highest order derivative, approaches to zero creates trouble when used in conjunction with many classical techniques.
But when the banks get into trouble with their derivative schemes, they are not serving depositors, who are not getting a cut of the profits; and by no stretch of the imagination are the depositors liable for the losses.
released a report detailing extensive failures to contain derivatives risks at JPMorgan Chase -- troubles that lead to billions of dollars in losses from a single trade.
At the heart of A.I.G.'s troubles are a type of derivative called credit-default swaps.
The anger peaked over the weekend when correspondence surfaced showing that A.I.G. was on the brink of paying rich bonuses to executives who had dealt in the derivative contracts at the center of A.I.G.'s troubles.
The trouble is, derivatives rules are weaker or nonexistent elsewhere, making the call for substituted compliance either a tactic to delay enforcement until the rest of the world updates its regulations or, worse, an attempt to avoid tough regulation altogether.
Banks have written down more than $100 billion worth of their holdings of complex derivatives tied to the troubled mortgage sector, and now they stand vulnerable to billions more in write-downs as counter-parties to the ailing bond insurance industry.
AIG got itself into deep trouble using derivatives to insure toxic mortgages that abruptly turned worthless, leaving it without the ability to pay its counterparties.
In the latest sign, prosecutors won't bring charges against Joseph Cassano, the former head of the derivatives unit whose failures precipitated the American International Group's troubles.
Remember when his old Chicago banking buddy Jamie Dimon, the CEO of JPMorgan Chase, first ran into that bit of trouble over his bank's "London Whale" derivative scam?
