John losses, while still betting more on

John Rusnak was bullishon the yen. He thought the yen took all the damage it could following thebursting of the Japanese bubble.

He believed it would appreciate  against the dollar. Under these circumstances,traders would buy forward contracts to get yen for cheaper than its marketvalue, as well as hedge the position with a combination of put and calloptions. He was so bullish on the yen that he ignored hedging his forward contracts.His luck held until a series of policy changes in Asia culminated in crisis onthe Asian market and prompted a long slide in the value of the yen and otherAsian currencies.            Withhis new account, he amplified the extent of his trades and kept his losses unseenby using options and a higher level forex contract called a historical raterollover. This permitted him to hold off recognizing his losses, while stillbetting more on the yen. This meant that the total value of the forexoperations at Allfirst was growing.

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Even though the losses were barely noticeable,the increasing amount of capital being tied up in the currency market was noticeable.Rusnak’s positionsrevealed a staggering loss of $691 million. Allfirst and its parent bank AlliedIrish hoped that Rusnak was party to a grander conspiracy to fleece the bankfor profit, but Rusnak had not earned anything above his regular salary andbonuses.

Rusnak cooperated with the FBI and revealed how he had been able tomaneuver around the bank’s loose restrictions. Rusnak’s transparency with theFBI hurt Allfirst because it had no one to blame but its own permissivepolicies. Of course, shareholders took the bank to task over the matter. AlliedIrish’s stock fell sharply, but it proved more robust than Barings had beenafter the Nick Leeson scandal. John Rusnak was sentenced to seven and a halfyears in prison and fined $1 million. (Beattie, 2017)            Alwayslearn from the more experienced and interact with trading talents. Observingveteran traders allows you to understand their decision-making and thoughtprocesses with regard to trading decisions.

            Irelandhas floated one of the banks whose collapse helped push the country to aninternational bailout, marking a milestone in the country’s economic turnaround.The government raised at least €3bn in the IPOof Allied Irish Banks, which valued the group at €12bn. The offering was pricedat €4.40 per share. The €12bn valuation was in the middle of the bank’spreviously announced price-range, and in line with analyst expectations.

Ireland’s government will still hold between 71%and 75% of AIB’s shares after the sale, and expects to slowly sell down itsstake in the coming years. The government paid almost €21bn to rescue the bankat the height of the financial crisis, but the government expects AIB toincrease in value further.The bank says it hasalready repaid €6.8bn of its €20.8bn bailout, through a combination of fees,interest, dividends, the redemption of some instruments, and other payments.

Some experts in Ireland dispute the figures, pointing out that some of thefees, like payments for a government guarantee, were not directly linked to thebailout. They also cite the immeasurable knock on cost to Ireland of rescuingAIB, since it helped push the country into a painful sovereign bailout. (Megaw, 2017)


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