Nick Leeson traded simultaneously on two exchanges in two different time zones. Does the fact that he was trading on two exchanges simultaneously automatically mean he was speculating, or is it what he was doing that makes the trades speculative?
What will be an ideal response?
It was what Leeson was doing that made his trades so speculative. If Leeson had been arbitraging, the only real exposure Barings would have borne was the exposure from not having offsetting margin requirements on the same exchange. Arbitrage trades should have earned gains on one exchange approximately equal to the losses suffered on the other. Because the exchanges were Barings' counterparties, credit risk was very low.
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What are the two general approaches used for account analysis?
What will be an ideal response?
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