Risk management mistakes associated with Bill Hwang's blow-up

Discussion in 'Risk Management' started by helpme_please, Mar 29, 2021.

  1. I don't have special insights. What I'm going to say is obvious.

    Main cause of Bill Hwang's blow-up is too much leverage. What surprised me about the leverage is why did multiple prime brokers extend him so much leverage that all of them died together? Shouldn't there be some established risk management process to prevent such things from happening in financial institutions?

    I would like to hear from other elite-traders on what are some other risk management mistakes that were made in this blow-up.
    murray t turtle likes this.
  2. ZBZB


    Five times just like portfolio margin available to retail.
  3. Yeah except 60 billion usd, not 5k.

    Much worse, however, is the fact that PB desks lent this guy many more billions after his equity investments went up many hundred percent with UNREALIZED PROFITS as collateral. You can't make this up. Pure greed and zero appreciation for risk management. This was a house of card that was waiting to collapse. If other hedge funds received the same privileges then we may probably hear more stories like this.

    JamesJ likes this.
  4. noddyboy


    I guess their risk models don't take into account concentration?
  5. ZBZB


    You need 100k for portfolio margin at a retail broker.
  6. Don't you get 4:1 even without portfolio margin? I never used portfolio margin yet also never had to look up margin rates as I don't lever up to need to check. Anyway its irrelevant as this here is a completely different ballgame. We are talking figures where a single desk can bring down an entire brokerage that existed for almost hundred years. Who knows what other cowboy loans those retards at its US desk extended. It's US traders who tarnished DB's reputation and saddled it with massive losses, same with Lehman, many units in Asia were highly profitable all the way until the end. Same story with Barclay's Capital. Something tells me that US trading desks should be staffed with more French MDs

  7. ZBZB


    4 to 1 is intraday Reg T, 2 to 1 overnight for accounts with $2k.
    MoreLeverage likes this.
  8. Alright, not my playground but good to know.

  9. MarkBrown


    looks like an engineered scam from the beginning to me.
    murray t turtle likes this.
  10. tsznecki


    Hard to lever up with 10K to your name volpunter. LOL.
    #10     Mar 29, 2021
    SunTrader likes this.