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Economic Quarterly

Fall 1995

Derivatives Debacles: Case Studies of Large Losses in Derivatives Markets

Anatoli Kuprianov

Numerous accounts of derivatives-related losses experienced by established and reputable firms have raised concerns over the rapid growth of derivatives markets. Two of the largest derivatives-related losses to date involved Metallgesellschaft AG of Germany and Barings PLC of England, which both lost over $1 billion. Such incidents often lead to demands for stricter regulation. But a careful study of these incidents suggests no need for sweeping regulatory reform. It does suggest a need for greater international cooperation among regulators, however.

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