
Crowd busting
The financial crisis revealed most dealers had near-identical exposures in exotic derivatives markets – whether in credit, interest rates, equity or inflation – leaving them unable to exit or hedge their positions when markets tanked. How have traders changed their risk management processes as a result? Duncan Wood investigates

When Jean-Claude Trichet, president of the European Central Bank (ECB), stepped up to the podium at 2:30pm on June 5, 2008, the markets knew what was coming. The ECB had just voted to hold rates steady, but Trichet was expected to signal the next move would be lower. In the face of a growing economic crisis, the US had already cut rates by 225 basis points in the first half of the year, while the UK had cut by 100bp. But Trichet had a surprise up his sleeve: the central bank was worried about
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