Do Traders Become Rogues or Do Rogues Become Traders? The Om of Jerome And The Karma of Kerviel

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Original languageEnglish
Article number4
Pages (from-to)88-135
Journal / PublicationCorporate and Business Law Journal
Volume2
Issue number1
Publication statusPublished - Feb 2021

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Abstract

We present a study of Jerome Kerviel, a trader at Société Générale, and how he racked up positions far exceeding his authorized risk limits resulting in a spectacular loss and in the process becoming the perpetrator of the biggest rogue trading scandal, thus far, in recorded history. We focus on many aspects of the financial markets and attempt to provide an appropriate context to the proceedings by considering some historical matters and furnishing an alternate definition for a rogue trader. With the goal of highlighting policy relevant insights, we look at the organization structure,trading profits, risk management, regulation, ethics and the many conflicts that arise therein with some focus on Kerviel and his immediate environment. We provide a simple guide for the budding rogue trader that could also be helpful for the aspiring control agent. We conclude by delving deeper into the ethical issues regarding rogue trading and provide possible ways to mitigate, if not resolve, the many moral dilemmas that arise in business, life and elsewhere.
We consider many conundrums related to: the question of size of financial firms,organization behavior, designing social systems, ethics, enhancing human welfare, excessive reliance on mathematics, the role played by auditors, better comprehension of history, evolution and the need for universal education. We have strived to ensure that the manuscript is written in a style such that it can be read by almost anyone, with or without a strong business background. Some of the topics we discuss are: A Joke at First and Also at Last; History: A Product Structured by Winners; Rogue One on Delta One; Depart-Mental Drill Down; Confessions of The Control Agents; A Slow Walk On A Tight Rope; The Glass Castle Called Basel; “e” for Everything,Everyone, Everywhere including Evolution, Education and Ethics; Sick Lesson from Nick Leeson; Rogue Trading Guide for Dummies; Mathematically Sophisticated Models or Merely Superior Mora. 

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