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Allied Lyons

In: GLOBAL DERIVATIVE DEBACLES From Theory to Malpractice

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  • Laurent L Jacque

Abstract

Allied-Lyons — better known for its teabags and its teacakes than for its forays into the currency market—announced on March 17, 1991 a stunning $269 million foreign exchange loss (approximately 20% of its projected profits for 1991). Facing a sluggish economy, its treasury department had developed a sophisticated scheme that gambled not so much on the absolute level of the dollar/sterling exchange rate as on its volatility. This gamble was achieved through a combination of currency options known as straddles and strangles that in this particular case would have produced profits had the exchange rate turned out to be less volatile than the option premium implied…

Suggested Citation

  • Laurent L Jacque, 2015. "Allied Lyons," World Scientific Book Chapters, in: GLOBAL DERIVATIVE DEBACLES From Theory to Malpractice, chapter 8, pages 105-124, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814663267_0008
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