There are no stupid questions

29 January 2008 By Richard Beales Follow @richardbeales1

Wall Street was hammered by repackaged subprime mortgages. SocGen took a hit on equity futures. Modern finance is about taking risk through complex instruments. Bank CEOs need to understand these products, but many don t. Here s a starter kit of questions for shareholders to ask.

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Citigroup Chairman Win Bischoff addressed a financial markets conference on January 29, according to Reuters, saying: "You can't manage risk just on process. There also has to be judgment at the top of the organization".
Société Générale's rogue trader operated in equity derivatives markets. Globally, the notional value of equity derivatives contracts outstanding rose from $2.3tr in mid2002 to $10tr in mid2007, according to the International Swaps and Derivatives Association.

Credit default swaps outstanding increased from $1.6tr to $45.5tr over the same period.

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