JPMorgan Switches Risk Model Again After Whale Loss
JPMorgan is unable to escape the “London Whale” incident that highlighted headlines everywhere with billions of dollars lost for the company. Even now, the company is trying to move further away from the incident by removing the supposed model that is to blame for the faulty calculations in the trade. The losses that resulted from understating risks in the formula amounted to more than $6.2 billion last year.
JPMorgan has been under investigation for their constant swaps of their models, specifically the January 2012 swap that is being investigated by the SEC. Of course, CEO Jamie Dimon is stating that the models were merely faulty in predicting changes, and that they can never be fully accurate.
In the long term financial sense, it seems a bit ridiculous that JPMorgan is still getting criticism for the trade losses when it was actually a minor portion of their total portfolio in comparison. However, I understand the need to truly investigate JPMorgan’s disclosures to prevent any possible misleading information that could be abused for the company’s own advantage. Also, I think the incident raises awareness of just how powerful some of these investing firms are, as they are capable of moving entire markets with their own trades.