Rebuilding Trust at a Broker-Dealer After Exotic Options Losses
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2025年6月10日
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A broker-dealer experienced a significant multimillion-dollar loss due to unauthorized parameter changes by a trader to a valuation model for exotic options in its trading book. The changes, initiated by a single trader, escalated from minor alterations to substantial and damaging modifications, and remained undetected until the trader took a vacation. The company promptly informed regulators and engaged FTI Consulting for a comprehensive analysis of the impact.
Our Impact
- The broker-dealer gained clarity on where accountability broke down and was able to address control lapses across teams and functions.
- The company’s governance processes and the valuation framework were strengthened with targeted improvements tailored to the its structure and risk profile.
- Equipped the client with a clear, defensible analysis of the financial impact, the company was able to confidently engage with regulators and auditors.
Our Role
- FTI Consulting conducted a detailed forensic investigation into unauthorized model parameter changes, analyzing communications and systems and categorizing all related events and actors.
- We analyzed the timeline and scale of financial losses caused by the altered valuation parameters and subsequent hedge adjustments. We also verified the integrity of the current trading book’s valuation.
- We assessed systemic, procedural and governance failures that allowed the trader’s actions to go undetected, identifying control deficiencies across all lines of defense beside risk management.
- FTI Consulting delivered a robust set of recommendations for enhanced system controls, governance oversight, improved modeling and targeted training to mitigate future risks.
发布于
2025年6月10日
主要联络人
Senior Managing Director, Leader of Securities, Commodities & Derivatives
董事总经理