Erosion of Ethics in Credit Derivative: A Case Study

Abstract

This paper studies the erosion of ethics in credit derivative leading to devastating losses to a financial intermediary, JP Morgan, in a scandal that had one of its protagonists earning the moniker the "London Whale." In the process, the paper suggests that the higher management will have to foresee how the limitations are imposed on the market values of the synthetic credit portfolio to avoid further breaches to be caused in other bank metrics. The accounting sectors will have to consider sub-methods like an integrated financial information system for purposes of accuracy to prevent the London whale from economic depressions.