When Derivatives Go Wrong
Derivatives are useful tools, but leverage and hidden risks have caused some of finance’s biggest disasters. Here are famous blowups, from a bank brought down by one trader to oil futures that went below zero.
Famous disasters
| Year | Event | What went wrong |
|---|---|---|
| 1994 | Orange County, California | Leveraged interest rate bets lost about $1.6 billion; the county went bankrupt |
| 1995 | Barings Bank | One trader’s hidden futures losses of about £827 million sank a 233-year-old bank |
| 1998 | Long-Term Capital Management | Highly leveraged bets unraveled; banks organized a $3.6 billion rescue |
| 2008 | AIG | Credit default swap losses required a government rescue |
| 2021 | Archegos Capital | Swap-based stock bets collapsed; banks lost more than $10 billion |
Public-record history.
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