Valuation and Risk
Operational Risk
Operational risk in derivatives business, from booking errors and confirmation breaks to failed settlements and rogue trading.
Introductory3 pagesPractitioner1 page
1Operational Risk
- IntroductoryOperational Risk in DerivativesThe regulatory definition includes legal risk and excludes strategic risk and reputational risk.
- IntroductoryBooking Errors and Confirmation MismatchesIf the direction is reversed or an amount is entered with the wrong number of digits, positions, collateral, and settlement amounts go forward on the wrong basis.
- PractitionerSettlement Failures and Reporting ErrorsA settlement failure leads to costs, compensation, and losses when a counterparty does not deliver. A reporting error leads to correction effort and penalties.
- IntroductoryRogue Trading Cases: Barings, Societe Generale and OthersAt Barings, losses hidden at its Singapore subsidiary reached GBP 827 million, and the bank collapsed.