Trader loses £1.4 billion. Who wins.

[Official Old Man]

No one seems to be able to answer this so I'll ask our expert team of BHA posters.
Kweku Adoboli, a trader for UBS, lost £1.4 billion. Now that is a lot of money but can someone tell me where it goes? He must have given it to someone. When he buys shares he must buy them from somebody. If he bought a share for £1000 and that share went down in value to £500 he must have given that £1000 to another bank or trader.

 

[Hatterlovesbrighton]

The people who he traded with.

 

[Postman Pat]

Who wins? The lawyers..... they always win.

 

[Official Old Man]

The people who he traded with.

So someone somewhere gains £1.4 billion. Why do we not hear about them? I guess also it would not be one person but many many different banks and shares all over the world which means £1,400,000,000 split say 1000 ways wouldn't be that much.

 

[Bold Seagull]

No one seems to be able to answer this so I'll ask our expert team of BHA posters.
Kweku Adoboli, a trader for UBS, lost £1.4 billion. Now that is a lot of money but can someone tell me where it goes? He must have given it to someone. When he buys shares he must buy them from somebody. If he bought a share for £1000 and that share went down in value to £500 he must have given that £1000 to another bank or trader.

It's all promises, options, futures and derivatives innit. Money is an illusion anyway, mainly promises upon promises like a house of cards. Someones 1.4bn loss, is not always another's 1.4bn gain.

 

[ditchy]

The 1.4 bill is filtered into the many different counterparties he dealt with so his combined loss is 1.4 bill the counterparties he dealt with would would gain 1.4bill . This may occur over an instance of something like 10000 transactions . The loss is only a paper loss and is a value at the time accounting took place . The actual losses , are write downs and not crystalised until they actually close out the other side of the trade . That may be immediately or over a period of time. In Ubs Case they traded alot immediately therefore crytalising a loss. Theoretically they could have held it and unwound later to make a profit !

 

[Official Old Man]

It's all promises, options, futures and derivatives innit. Money is an illusion anyway, mainly promises upon promises like a house of cards. Someones 1.4bn loss, is not always another's 1.4bn gain.

See, now that is what they all say. But even a promise has to be paid surely.

 

[Landgull]

As stated earlier the Lawers which includes the Law Fraternity always win. However, in this case it always the brokers that win and of course the treasury.

 

[Arthur]

Another question for you finance types I read earlier that UBS have been fined just shy of £30m by the regulator.

How is that fine worked out and what does the regulator do with it?

 

[Biscuit]

American's top 1% are richer than the bottom 90% put together.

Just sayin' like.

 

[ditchy]

Another question for you finance types I read earlier that UBS have been fined just shy of £30m by the regulator.

How is that fine worked out and what does the regulator do with it?

Dunno , ask the FSA .. FSA swallows it up on admin no doubt .

 

[Box of Frogs]

The 1.4 bill is filtered into the many different counterparties he dealt with so his combined loss is 1.4 bill the counterparties he dealt with would would gain 1.4bill . This may occur over an instance of something like 10000 transactions . The loss is only a paper loss and is a value at the time accounting took place . The actual losses , are write downs and not crystalised until they actually close out the other side of the trade . That may be immediately or over a period of time. In Ubs Case they traded alot immediately therefore crytalising a loss. Theoretically they could have held it and unwound later to make a profit !

Er, thats what I was going to say, ahem.

 

[User removed 4]

It's all promises, options, futures and derivatives innit. Money is an illusion anyway, mainly promises upon promises like a house of cards. Someones 1.4bn loss, is not always another's 1.4bn gain.

Yes it is , it's a zero sum game, for him to lose 1.4 bio, the entity on the other side of the trade has to gain it.

 

[Superphil]

He wins. When he gets outof the joint he rolls on down to Caymen, or Geneva, and withdraws his stash and starts a new life on the riviera or in St Kitts

 

[Bold Seagull]

Yes it is , it's a zero sum game, for him to lose 1.4 bio, the entity on the other side of the trade has to gain it.

In reality, the 1.4bn was a network of hedge funds, and a myriad of options and other trades. Ultimately they don't know how much is lost yet as it will fluctuate over time.

 

[User removed 4]

In reality, the 1.4bn was a network of hedge funds, and a myriad of options and other trades. Ultimately they don't know how much is lost yet as it will fluctuate over time.

Of course they know how much he lost, they've closed out all his losing positions, you havent really got a clue what you're talking about , you're quoting as fact the sort of superficial, sensationalist coverage you've seen in the daily papers.

 

[cloud]

The whole point about options and hedge funds is that you shouldn't end up out of pocket.

Much of trading is about confidence. If the housing market crashes and your house is only worth half of what it was before, who loses? The money hasn't gone anywhere, the previous value was just an illusion.

 

[User removed 4]

The whole point about options and hedge funds is that you shouldn't end up out of pocket.

Much of trading is about confidence. If the housing market crashes and your house is only worth half of what it was before, who loses? The money hasn't gone anywhere, the previous value was just an illusion.

I think you're confusing hedging and hedge funds, options are or can be used as a tool to hedge risk and exposure, hedge funds is a bit of a misnomer, as they almost always engage in high risk, highly leveraged trades.

 

[El Presidente]

just an illusion.

Officially the GREATEST song by a group whose singer went on to apear in Doctor Who EVER.

Leee John is my hero

 

[El Presidente]

you're quoting as fact the sort of superficial, sensationalist coverage you've seen in the daily papers.

Well said bushy, you would NEVER do that!