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JPMorgan Chase London Whale C: Risk Limits, Metrics, and Models


  • Arwin G. Zeissler
  • Andrew Metrick


All major financial institutions use various risk limits, metrics, and models to monitor the risk of their activities. Value at Risk (VaR) is one of the most commonly used ways to measure and monitor market risk. At JPMorgan Chase (JPM), very large derivative positions established by Bruno Iksil in the Synthetic Credit Portfolio (SCP) caused the bank’s Chief Investment Office (CIO) to exceed its VaR limit for 4 days in a row in January 2012. In response, the CIO adopted a new VaR model on January 30, which appeared to immediately reduce VaR by half. However, JPM soon discovered that this new VaR model had not been properly implemented and included formula and operational errors, and the bank went back to using the previous model. In addition, Iksil, other SCP staff, and their managers also disregarded several other risk metrics and limits during the first quarter of 2012. However, after JPM’s Chief Investment Officer learned on March 23 that Iksil and the SCP had breached the CIO’s mark-to-market Credit Spread Widening 10% risk limit the day before, she ordered trading of the SCP to be halted immediately.

Suggested Citation

  • Arwin G. Zeissler & Andrew Metrick, 2014. "JPMorgan Chase London Whale C: Risk Limits, Metrics, and Models," Yale School of Management YPFS Cases 46786, Yale School of Management, revised Feb 2015.
  • Handle: RePEc:ysm:ypfswp:46786

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    Systemic Risk; Financial Crises; Financial Regulation;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation


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