Nick Leeson

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DEFINITION of 'Nick Leeson'

A former manager with England's Barings Bank, Leeson became a rogue trader while heading up the company's Singapore division in the early 1990s. After originally earning massive profits for Barings via several unauthorized trades in 1992, Leeson eventually lost over $1 billion in company capital while hiding the losses in a little-used errors account that was hidden from his superiors. Most of the rogue trades occurred in the futures market, where his losses multiplied quickly in the final weeks before he fled his office.

BREAKING DOWN 'Nick Leeson'

Leeson was later arrested and served six years in a Singapore prison. His trading losses single-handedly brought down Barings Bank, the first investment bank founded in England. The firm was declared insolvent less than a week after Leeson's trading losses were discovered.

Many lessons were learned about internal controls and trade auditing as a result of Mr. Leeson's rogue trading. As has been seen before, a trader trying to hide losses will tend to risk more in an attempt to right the initial wrongs. Lesson's trading losses were originally just under $200 million, but they skyrocketed to over $1 billion when he made a risky futures bet in the hopes of evening out prior losses.

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RELATED FAQS
  1. Who set the record loss for "rogue traders"?

    Every trader wants to set a record, but the hope is that it will be a record profit rather than a loss. With losses topping ... Read Full Answer >>
  2. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  3. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  4. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
  5. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>
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    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>

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