The Collapse Of Barings Bank
This story begins with a former back office clerk being promoted to a derivatives trader for Barings Bank's Singapore Branch and ends with the collapse of a 232-year old banking empire. As we began researching this assignment, we all asked the same question, "How does a 28 year old trader bring about the collapse of a 232-year old banking empire?"
To understand how this debacle came about, one must have a basic understanding of the nature of a derivative and what they are designed to do. Initially, derivatives were designed to provide an investor/trader with a type of insurance against unexpected movements in prices which could devastate an investment portfolio. These derivatives take the form of futures and options:
A future is an agreement for the future delivery of a certain commodity/
financial instrument at a price set at the time of the contract.
An option gives the purchaser the right, but not the obligation, to buy/sell
a certain quantity of a specific......
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Approximate Word Count: 1025
Approximate Pages: 5 (250 words per double-spaced page)
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