Case study of barings bank

Introduction

In this case report, firstly, the arbitrage opportunities in the authorized trading which was supposed to exploited by Leeson and Lesson’s trading strategy will be focused on. Secondly, our interest is to find out the strategy on how to lose more money than Leeson did. As the more we know how to lose money, the more effective control for the investment we realize. In addition, the loose internal management in Barings Bank was also a critical reason for the collapse of Barings and lessons from that is worth discussing and referring by the present financial institute.

1. Arbitrage opportunities in trades

1.1 Arbitrage opportunities between Osaka and Singapore
Nick Leeson was appointed to trade derivatives on the Singapore International Monetary Exchange (SIMEX) and the Osaka exchange, and hence was making a low-risk profit, known as “switching”. Obviously, arbitrage opportunities existed in trading Nikkei future contracts in the two markets, when there is dif...