As JPMorgan reels from a complicated hedging strategy, one that misfired to the tune of at least $2.3bn in losses, derivatives-market participants worried about new rules on trading fear it will be harder to argue for more lenient treatment. The loss is also a reminder of the dangers of seeking bigger profits by minimizing the cost of hedging. While credit derivatives were created to allow lenders to offset the threat of a default by a borrower, the product has been associated with a number of blowups in recent years. 

1. How did JPMorgan manage to lose so much money when trying to hedge its exposure? 

2. What are the implications for the derivatives market of ‘blow-ups’ like these?