Credit Suisse Takes $4.7B Hit on Archegos Meltdown

Post by vmception » Tue, Apr 06, 2021, 7:49 PM UTC

itsoktocry wrote: post #17

osrec wrote: post #8

As someone who has worked in the Investment Banking industry for a while, I'm always amazed that risk professionals get paid significantly less than the front office guys. This in turn attracts less talented people in risk, who can then be outsmarted by the whipper snappers in the front office teams. If IBs don't want to lose bucket loads of money every so often, pay your risk guys a bit more so you hire the same cal…

> pay your risk guys a bit more so you hire the same calibre of individual that would otherwise end up on the trading/structuring/quant desks. Reverse the causation here: they don't pay risk guys enough because they don't really care about the risks they are taking. Because, you're right, if they cared they could solve issues like this tomorrow.

Post by lotsofpulp » Tue, Apr 06, 2021, 8:03 PM UTC

fractionalhare wrote: post #82

lotsofpulp wrote: post #58

Earlier quoted context omitted.

>What sucks is the leverage is going to be demonized here, when the actual problem is Hwang's lack of transparency (albeit legal) to his brokers and his frankly stupid risk management. Seems to me the onus is on CS and other prime brokers to require Hwang to disclose or otherwise do due diligence on his other bets.

They can wag their finger, but they don't legally have recourse for finding out this information ahead of time if Hwang and his existing lenders don't volunteer it. That's just the current state of play with margin lending.

Post by alex504 » Tue, Apr 06, 2021, 9:00 PM UTC

andys627 wrote: post #61

Who took the other side of this bet? Ie who made 4.7b?

Post by chrisgp » Tue, Apr 06, 2021, 10:27 PM UTC

lordnacho wrote: post #28

freebee4567 wrote: post #23

Earlier quoted context omitted.

if you are levered 10 to 1 and the stock has an implied vol of 10% you only need a 1 SD move to eat all your capital. Viacom is now at 60% implied vol so they could get those losses with a position as small as $10 billion.

That implied vol is annualized. It follows a square-root law, so that daily is something under 4% (60/sqrt(trading days)).

Post by ac29 » Wed, Apr 07, 2021, 3:03 AM UTC

satellite2 wrote: post #86

TuringNYC wrote: post #52

Earlier quoted context omitted.

>> From what I gather, Archegos had $10B of equity in total? Typically (sensibly) you don't put all your eggs in one basket as a fund, even a quite concentrated fund. >> How big was the position? I think you're trying to get to "how was the loss so big?" The size of the position is only part of the answer. The other comments answer the size of the position. But there are several other factors here. They probably liqu…

Or too early as most of the liquidated assets regained a lot Friday afternoon and almost everything by Monday...