Authors: Frank Partnoy
Infectious Greed (74 page)
6
Krieger, p. 27.
Krieger, p. 27.
7
Stevens, p. A1.
Stevens, p. A1.
8
Stevens, p. A1.
Stevens, p. A1.
9
Krieger, p. 6.
Krieger, p. 6.
10
Krieger, p. 6.
Krieger, p. 6.
11
The theory of options pricing was developed in two key articles published in 1973, one coauthored by Fischer Black and Myron Scholes, the other by Robert Merton. Fischer Black and Myron Scholes, “The Pricing of Options and Corporate Liabilities,”
Journal of Political Economy, Volume 81,
May-June 1973, p. 637; Robert C. Merton, “Theory of Rational Option Pricing,”
Bell Journal of Economics and Management Science, Volume 4,
Spring 1973, p. 141.
The theory of options pricing was developed in two key articles published in 1973, one coauthored by Fischer Black and Myron Scholes, the other by Robert Merton. Fischer Black and Myron Scholes, “The Pricing of Options and Corporate Liabilities,”
Journal of Political Economy, Volume 81,
May-June 1973, p. 637; Robert C. Merton, “Theory of Rational Option Pricing,”
Bell Journal of Economics and Management Science, Volume 4,
Spring 1973, p. 141.
12
Peter L. Bernstein,
Capital Ideas: The Impossible Origins of Modern Wall Street
(The Free Press 1992), p. 227.
Peter L. Bernstein,
Capital Ideas: The Impossible Origins of Modern Wall Street
(The Free Press 1992), p. 227.
13
Millman, p. 19.
Millman, p. 19.
14
Millman, p. 13.
Millman, p. 13.
16
Lewis, p. 119.
Lewis, p. 119.
17
Stevens, p. A1.
Stevens, p. A1.
18
Bernstein, p. 17.
Bernstein, p. 17.
19
This research ultimately was published in 1970. Eugene F. Fama, “Efficient Capital Markets: A Review of Theory and Empirical Work,”
Journal of Finance, Volume 25
(1970), p. 383.
This research ultimately was published in 1970. Eugene F. Fama, “Efficient Capital Markets: A Review of Theory and Empirical Work,”
Journal of Finance, Volume 25
(1970), p. 383.
20
A good review of this literature is Stephen F. LeRoy, “Efficient Capital Markets and Martingales,”
Journal of Economic Literature, Volume 27
(1989), p. 1,583.
A good review of this literature is Stephen F. LeRoy, “Efficient Capital Markets and Martingales,”
Journal of Economic Literature, Volume 27
(1989), p. 1,583.
21
Krieger, pp. 33, 38.
Krieger, pp. 33, 38.
23
Krieger, p. 38.
Krieger, p. 38.
24
Krieger, p. 96.
Krieger, p. 96.
25
Krieger, p. 104.
Krieger, p. 104.
26
Put-call parity typically is stated as the value of a put (with an exercise price equal to the price of a stock), plus the price of the stock, is equal to the value of a call (with an exercise price equal to the price of a stock), plus the value of the exercise price, discounted by the risk-free rate. In other words, P + S = C + PV(E), where PV(E) is the present value of the exercise price.
Put-call parity typically is stated as the value of a put (with an exercise price equal to the price of a stock), plus the price of the stock, is equal to the value of a call (with an exercise price equal to the price of a stock), plus the value of the exercise price, discounted by the risk-free rate. In other words, P + S = C + PV(E), where PV(E) is the present value of the exercise price.
27
Krieger, pp. 76, 98.
Krieger, pp. 76, 98.
28
Krieger, pp. 69-70.
Krieger, pp. 69-70.
29
Michael R. Sesit, “Krieger Returns to Trading Role in Currencies,”
Wall Street Journal,
September 12, 1990, p. C1.
Michael R. Sesit, “Krieger Returns to Trading Role in Currencies,”
Wall Street Journal,
September 12, 1990, p. C1.
30
Sesit, p. C1.
Sesit, p. C1.
31
Stevens, p. A1.
Stevens, p. A1.
32
Stevens, p. A1.
Stevens, p. A1.
34
Randall Smith, “The Big Casino: How Currency Traders Play for High Stakes against Central Banks,”
Wall Street Journal,
September 18, 1992, p. A1.
Randall Smith, “The Big Casino: How Currency Traders Play for High Stakes against Central Banks,”
Wall Street Journal,
September 18, 1992, p. A1.
35
Smith, p. A1.
Smith, p. A1.
38
Stevens, p. A1.
Stevens, p. A1.
39
Stevens, p. A1.
Stevens, p. A1.
40
Sesit, p. C1.
Sesit, p. C1.
41
Millman, p. 244.
Millman, p. 244.
42
“Bankers Trust Data on Restatement,” p. D5.
“Bankers Trust Data on Restatement,” p. D5.
43
“Bankers Trust Data on Restatement,” p. D5.
“Bankers Trust Data on Restatement,” p. D5.
44
Millman, p. 245.
Millman, p. 245.
45
Glynn, p. 88.
Glynn, p. 88.
46
“How Bankers Trust Lied about $80 Million,” p. 79.
“How Bankers Trust Lied about $80 Million,” p. 79.
47
Robert Guenther, “Bankers Trust Reduces Gain on Fed's Orders,”
New York Times,
July 21, 1988, p. C1.
Robert Guenther, “Bankers Trust Reduces Gain on Fed's Orders,”
New York Times,
July 21, 1988, p. C1.
48
Guenther, p. C1.
Guenther, p. C1.
49
Charles W. Stevens, “Bankers Trust Isn't Expected to Post Big Gains from Currency Trading for the First Quarter,”
Wall Street Journal,
April 18, 1988.
Charles W. Stevens, “Bankers Trust Isn't Expected to Post Big Gains from Currency Trading for the First Quarter,”
Wall Street Journal,
April 18, 1988.
50
Glynn, p. 88.
Glynn, p. 88.
51
Charles W. Stevens, “Stable 1st-Quarter Currency Rates Hurt Most Big Bank Foreign Exchange Profit,”
Wall Street Journal,
April 27, 1988.
Charles W. Stevens, “Stable 1st-Quarter Currency Rates Hurt Most Big Bank Foreign Exchange Profit,”
Wall Street Journal,
April 27, 1988.
52
“How Bankers Trust Lied about $80 Million,” p. 79.
Chapter 2: Monkeys on Their Backs“How Bankers Trust Lied about $80 Million,” p. 79.
3
Sarah Bartlett, “Bankers Trust: Let's Make a Deal, and Another, and Another, . . . ,”
Business Week,
August 11, 1986, p. 51.
Sarah Bartlett, “Bankers Trust: Let's Make a Deal, and Another, and Another, . . . ,”
Business Week,
August 11, 1986, p. 51.
6
Robert M. Garsson, “Sanford Named Bankers Trust's Next President,”
American Banker,
June 17, 1982, p. 3.
Robert M. Garsson, “Sanford Named Bankers Trust's Next President,”
American Banker,
June 17, 1982, p. 3.
7
Sarah Bartlett, “Bankers Trust Could Beat the Street at Its Own Game,”
Business Week,
April 4, 1988, p. 86.
Sarah Bartlett, “Bankers Trust Could Beat the Street at Its Own Game,”
Business Week,
April 4, 1988, p. 86.
10
Brett D. Fromson, “Guess What? The Loss Is Now . . . $20 Million: How Bankers Trust Sold Gibson Greetings a Disaster,”
Washington Post,
June 11, 1995, p. A1.
Brett D. Fromson, “Guess What? The Loss Is Now . . . $20 Million: How Bankers Trust Sold Gibson Greetings a Disaster,”
Washington Post,
June 11, 1995, p. A1.
11
Fromson, p. A1.
Fromson, p. A1.
15
“In Search of the Crock of Gold: Diversify or Die,” p. 18.
“In Search of the Crock of Gold: Diversify or Die,” p. 18.
16
“In Search of the Crock of Gold: Diversify or Die,” p. 18.
“In Search of the Crock of Gold: Diversify or Die,” p. 18.
18
Saul Hansell, “Change at Bankers Trust: Easier Said than Done,”
New York Times,
January 15, 1995, Sec. 3, p. 5.
Saul Hansell, “Change at Bankers Trust: Easier Said than Done,”
New York Times,
January 15, 1995, Sec. 3, p. 5.
19
Bartlett, “Bankers Trust Could Beat the Street at Its Own Game,” p. 86.
Bartlett, “Bankers Trust Could Beat the Street at Its Own Game,” p. 86.
20
Bartlett, “Bankers Trust Could Beat the Street at Its Own Game,” p. 86.
Bartlett, “Bankers Trust Could Beat the Street at Its Own Game,” p. 86.
22
Bartlett, “Bankers Trust Could Beat the Street at Its Own Game,” p. 86.
Bartlett, “Bankers Trust Could Beat the Street at Its Own Game,” p. 86.
25
Fromson, p. A1.
Fromson, p. A1.
26
Garsson, p. 3.
Garsson, p. 3.
28
“Bankers Trust; Leaner, Meaner, Keener,” p. 73.
“Bankers Trust; Leaner, Meaner, Keener,” p. 73.
30
Loomis, p. 77.
Loomis, p. 77.
31
Hector, p. 104.
Hector, p. 104.
32
John P. Forde, “Big Firms Involved in Rate Swaps Form Dealers Association,”
The Bond Buyer,
March 8, 1985, p. 4.
John P. Forde, “Big Firms Involved in Rate Swaps Form Dealers Association,”
The Bond Buyer,
March 8, 1985, p. 4.
34
Forde, p. 4.
Forde, p. 4.
35
Forde, p. 4.
Forde, p. 4.
36
Forde, p. 4.
Forde, p. 4.
37
Arthur Walther, an investment banker with Goldman, Sachs & Co., said that in addition to trying to standardize documentation and practices among interest-rate swap deals, the group will also “explore the accounting and regulatory implications” of the off-balance-sheet financings. Forde, p. 4.
Arthur Walther, an investment banker with Goldman, Sachs & Co., said that in addition to trying to standardize documentation and practices among interest-rate swap deals, the group will also “explore the accounting and regulatory implications” of the off-balance-sheet financings. Forde, p. 4.
38
Forde, p. 4.
Forde, p. 4.
40
Merton H. Miller, “Financial Innovation: The Last Twenty Years and the Next,”
Journal of Financial and Quantitative Analysis, Volume 21,
December 1986, pp. 459-471.
Merton H. Miller, “Financial Innovation: The Last Twenty Years and the Next,”
Journal of Financial and Quantitative Analysis, Volume 21,
December 1986, pp. 459-471.
41
Frank Partnoy, “Financial Derivatives and the Costs of Regulatory Arbitrage,”
Journal of Corporation Law, Volume 22
(1997), p. 211.
Frank Partnoy, “Financial Derivatives and the Costs of Regulatory Arbitrage,”
Journal of Corporation Law, Volume 22
(1997), p. 211.
42
Gibson Greetings, Inc. v. Bankers Trust Co.,
U.S. District Court, Southern District of Ohio, Civil Action No. 94-620, September 12, 1994, pp. 1-2.
Gibson Greetings, Inc. v. Bankers Trust Co.,
U.S. District Court, Southern District of Ohio, Civil Action No. 94-620, September 12, 1994, pp. 1-2.
43
In the Matter of BT Securities Corporation,
S.E.C. Release Nos. 33-7124, 34- 35136, 3-8579, December 22, 1994, p. 3.
In the Matter of BT Securities Corporation,
S.E.C. Release Nos. 33-7124, 34- 35136, 3-8579, December 22, 1994, p. 3.
45
Fromson, p. A1.
Fromson, p. A1.
49
Blaise Labriola, “Modeling the Gibson Trades,”
Derivatives Strategy, Volume 3,
September 19, 1994, p. 5;
Gibson Greetings, Inc. v. Bankers Trust,
p. 8.
Blaise Labriola, “Modeling the Gibson Trades,”
Derivatives Strategy, Volume 3,
September 19, 1994, p. 5;
Gibson Greetings, Inc. v. Bankers Trust,
p. 8.
52
“Gibson Greeting's Thank-You Card,” p. 2.
“Gibson Greeting's Thank-You Card,” p. 2.
55
Jessica Sommar, “Bankers Trust Announces New Managing Directors,”
Investment Dealers' Digest,
October 4, 1993, p. 10.
Jessica Sommar, “Bankers Trust Announces New Managing Directors,”
Investment Dealers' Digest,
October 4, 1993, p. 10.
56
Richard Layne, “BT's Bet on Derivatives Business Pays Off,”
American Banker,
August 10, 1993, p. 20.
Richard Layne, “BT's Bet on Derivatives Business Pays Off,”
American Banker,
August 10, 1993, p. 20.
58
Thackray, p. 2.
Thackray, p. 2.
59
Fromson, p. A1.
Fromson, p. A1.
60
Kelly Holland, Linda Himelstein, and Zachary Schiller, “The Bankers Trust Tapes,”
Business Week,
October 16, 1995, p. 106.
Kelly Holland, Linda Himelstein, and Zachary Schiller, “The Bankers Trust Tapes,”
Business Week,
October 16, 1995, p. 106.
61
Fromson, p. A1.
Fromson, p. A1.
63
Thackray, p. 8.
Thackray, p. 8.
64
Procter & Gamble v. Bankers Trust,
1996 U.S. Dist. LEXIS 6435, Southern District of Ohio, May 8, 1996, p. 10.
Procter & Gamble v. Bankers Trust,
1996 U.S. Dist. LEXIS 6435, Southern District of Ohio, May 8, 1996, p. 10.
65
Carol J. Loomis, “Bankers Trust Times; More Dirt about Derivatives!,”
Fortune,
November 27, 1995, p. 34.
Carol J. Loomis, “Bankers Trust Times; More Dirt about Derivatives!,”
Fortune,
November 27, 1995, p. 34.
66
Thackray, p. 5.
Thackray, p. 5.
67
Holland, Himelstein, and Schiller, p. 106; Loomis, “Bankers Trust Times; More Dirt about Derivatives!,” p. 34.
Holland, Himelstein, and Schiller, p. 106; Loomis, “Bankers Trust Times; More Dirt about Derivatives!,” p. 34.
68
Thackray, p. 8.
Thackray, p. 8.
69
Thackray, p. 8.
Thackray, p. 8.
70
The facts related to Fonkenell are based on a reported decision in the case of
In the Matter of Guillaume Henry André Fonkenell, a Former Institution-Affiliated Party of Bankers Trust Company,
New York, New York, Docket No. 98-032-B-I, 98-032-CMP-I, Federal Reserve Bulletin, May 1, 2001.
The facts related to Fonkenell are based on a reported decision in the case of
In the Matter of Guillaume Henry André Fonkenell, a Former Institution-Affiliated Party of Bankers Trust Company,
New York, New York, Docket No. 98-032-B-I, 98-032-CMP-I, Federal Reserve Bulletin, May 1, 2001.
72
Hansell, p. 5; Loomis, “A Whole New Way to Run a Bank,” p. 77.
Hansell, p. 5; Loomis, “A Whole New Way to Run a Bank,” p. 77.
73
Loomis, “A Whole New Way to Run a Bank,” p. 77.
Loomis, “A Whole New Way to Run a Bank,” p. 77.
74
Hansell, p. 5.
Chapter 3: Wheat First SecuritiesHansell, p. 5.
3
“CS First Boston: As Many Names as a Russian Novel,” p. 90.
“CS First Boston: As Many Names as a Russian Novel,” p. 90.
6
Dunne, p. 32.
Dunne, p. 32.
7
Fairlamb, p. 64.
Fairlamb, p. 64.
9
Stephen Fiddler, “Anger at Bankers Trust over Defector to CSFB,”
Financial Times,
February 15, 1990, p. 35.
Stephen Fiddler, “Anger at Bankers Trust over Defector to CSFB,”
Financial Times,
February 15, 1990, p. 35.
10
Dunne, p. 32.
Dunne, p. 32.
11
Mary Radford, “CS First Boston Creates Unique Swaps Subsidiary,”
Investment Dealers' Digest,
July 9, 1990, p. 6; Julian Walmsley, “Credit Suisse Still Out in Front in Derivatives Market,”
Extel Examiner,
June 28, 1993, p. 865.
Mary Radford, “CS First Boston Creates Unique Swaps Subsidiary,”
Investment Dealers' Digest,
July 9, 1990, p. 6; Julian Walmsley, “Credit Suisse Still Out in Front in Derivatives Market,”
Extel Examiner,
June 28, 1993, p. 865.
12
Michael Liebowitz, “Credit Suisse Derivative Unit Opens with a Bang in New York,”
Investment Dealers' Digest,
October 1, 1990, p. 6.
Michael Liebowitz, “Credit Suisse Derivative Unit Opens with a Bang in New York,”
Investment Dealers' Digest,
October 1, 1990, p. 6.
13
Tracy Corrigan, “Derivatives Newcomer Expects Quick Profits,”
Financial Times,
July 17, 1990, p. 29; “City Shop,”
The Times
(London), July 17, 1990.
Tracy Corrigan, “Derivatives Newcomer Expects Quick Profits,”
Financial Times,
July 17, 1990, p. 29; “City Shop,”
The Times
(London), July 17, 1990.
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