Rise of the biggest trader
In July 2007, investment bank Bear Stern announced that couple of its hedge funds have gone bust. These funds were primarily investing in derivative securities with home mortgages as their underlying. It was later unfolded that the underlying for these derivatives were actually a web of complex financially engineered instruments where actual underlying security was of very poor credit quality. This was the first time when “sub-prime” entered the popular market jargon; which essentially meant that though a derivative financial instrument is rated of investment grade, the actual security underlying that derivative is of sub-standard quality. The market briefly took note of this event correcting sharply. However, the event was soon forgotten as a standalone instance that could not have impacted the overall markets. Subsequent months witnessed one of the sharpest global markets rallies. In January of 2008 it was realized that Bear Stern was just a tip of the iceberg. The malaise of sub...