Barings Bankruptcy and Financial Derivat [Paperback]

Peter G. Zhang (Author)

Book Description

ISBN-10: 9810223331 | ISBN-13: 978-9810223335 | Publication Date: August 1995 | Edition: First Edition

This is a systematic source which tries to explain how and why the 233-year-old and the World's oldest merchant bank went into bankruptcy in a few days. It includes three parts with 10 separate chapters. Part 1 first describes what happened, then traces the birth and historical glory of the Barings bank and family, and finally how it was sold to the Internationale Nederlanden Groep (ING). As many terms of the financial derivatives are used in the first part, the book tries to provide an easy and systematic way to clarify the related financial derivatives products in part 2. Part 2 first gives a general discussion of the financial derivatives and a brief review of the historical development, growth and magnitude of the financial derivatives markets. It then concentrates on futures and options in two separate chapters. Finally, it explains the hedging and speculating functions of financial derivatives and how they can be used in combination to achieve particular objectives. Part 3 is the most important part of this book. It first provides necessary information on the Japanese financial markets and then analyzes how a single trade could have the power to bring down the Barings. Finally, it provides the lessons from the Leeson's case.

Editorial Reviews

Language Notes

Text: Chinese (translation)
Original Language: English --This text refers to an alternate Paperback edition.

Product Details

• Paperback: 166 pages
• Publisher: World Scientific Publishing Company; First Edition edition (August 1995)
• Language: English
• ISBN-10: 9810223331
• ISBN-13: 978-9810223335
• Product Dimensions: 8.3 x 5.9 x 0.5 inches
• Shipping Weight: 9.4 ounces (View shipping rates and policies)
• Average Customer Review: 3.0 out of 5 stars  See all reviews (1 customer review)
• Amazon Best Sellers Rank: #3,930,406 in Books (See Top 100 in Books)

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6 of 6 people found the following review helpful:

3.0 out of 5 stars When Egos and Arrogance Run Rampant, May 30, 1999

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Gregory McMahan (Tottori, Japan) - See all my reviews
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This review is from: Barings Bankruptcy and Financial Derivat (Paperback)

Zhang's Barings Bankruptcy presents a workable, though at times dry treatment of the Barings debacle and financial derivatives. Despite what the web page blurb says, this book only speculates at what caused the Barings bankruptcy. Zhang hints at certain things, but does not give us any real facts beyond what made the headlines throughout the world.

At first glance, the book is organized fairly well. Starting with the fall of the bank in early 1995, the first three chapters of the book give some interesting background on the Barings family and merchant bank. We also learn that at one point, the Barings family was considered to be one of the six great powers of Europe. In part two of the book, readers who are unfamiliar with exotic financial instruments received a thorough and comprehensive introduction to options, futures, and other exotic derivatives. Throughout the explanations Zhang employs vivid analogies and clever examples to get his point across. In part three of the book, Zhang makes a weak though well substantiated attempt to implicate the Japanese economy as the real culprit and devotes nearly a whole chapter to explaining the state of the Japanese economy at the time of the bankruptcy. Zhang gives us a brief history lesson of the Japanese political economy and Japanese financial markets, and a snapshot of Japanese economic and financial activity in and around the first two months of 1995.

Zhang agrees with such financial scholars as Jorion, author of Big Bets Gone Bad, that the people who wield these exotic derivative products are often more dangerous than the products themselves. Here, just as in the case of Robert L. Citron's key role in the Orange county bankruptcy and the rocket scientists at the helm of Long Term Capital Management's financial collapse, this line of reasoning may very well be true.