I will never forget the day a few years ago when I was watching the risk in our proprietary trading firm. It was a quiet, nondescript day. Like all days, I was watching our firm-wide P&L like a hawk.
All morning our P&L was up $3,000 to $5,000.
We had 25 traders trading mostly Eurex Bund, Dow Jones EuroStoxx 50 and DAX. No single trader was ahead more than a couple of thousand and none were behind more than a few hundred.
Just another normal, quiet day…
or so I thought.
Then I looked at my P&L screen and saw that we were no longer up $5,000, but we were down $10,000 then a second later we were down $50,000, then $110,000.
I raced out of my office and asked the traders what was happening in words not suitable for polite company.
The traders replied similarly that they did not have a clue, but the DAX and the Dow Jones EuroStoxx 50 were in free fall.
Seconds later
