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Net Net: Promoting innovation and managing change

How Did the UBS Rogue Trader Lose $2 Billion?

NYSE trader
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The news that rogue trader Kweku Adoboli lost $2 billion for UBS has many on Wall Street wondering exactly how he managed to put that much at risk, and what the losing trade or trades were.

The initial speculation was largely around the idea that the losses could have come from a bet on the Swiss franc. When the Swiss central bank intervened to push down the value of the franc, many traders were caught off guard. Could Adobli have used derivatives to make a huge levered bet that was wiped out by the intervention?

That theory has now been shot down by Robert Peston at the BBC.

"I have also learned that the losses generated by Mr Adoboli were not particularly associated with the decision earlier this month of the Swiss National Bank to force down the value of the Swiss Franc," Peston writes.

Instead of one big loss-making bet, Adobli apparently lost the billions in a series of small transactions over several months. This could make the failure of UBS to discover his rogue trading even more egregious.

UBS is expected to make a statement about the nature of Adoboli's trades.

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