Big Bets Gone Bad

Audience: The educated layperson at the Wall Street Journal readership level. Business and finance courses, both in professional seminars and traditional universities.

How can a municipal investment pool, which is supposed to be safe, lose billions of dollars? What are derivatives and how did they contribute to this tragedy?
In December 1994, Orange County became the largest municipality in U.S. history to become bankrupt. By borrowing heavily and placing the wrong bets, Orange County Treasurer Robert Citron lost $1.7 billion of Orange County's $7.4 billion investment portfolio.
Big Bets Gone Bad: Derivatives and Bankruptcy in Orange County is the first detailed description of the Orange County bankruptcy. Author Philippe Jorion, the only professor in Orange County who teaches and researches derivatives, is uniquely placed to understand the technical details of the portfolio and climate in the Orange County municipal government that encouraged the decisions that led to the bankruptcy.
Big Bets Gone Bad provides an introduction to the U.S. bond market and details Federal Reserve Chairman Greenspan's efforts to tighten credit. Its description of the $35 trillion derivatives market makes the losses of Barings Bank, Kashima Oil, West Virginia, and Metallgesellschaft more understandable. Big Bets Gone Bad explains what everyone should know about tax monies and public investments. Because nobody likes to lose $1.7 billion.

Publishers Weekly

Jorion (finance, Univ. of California-Irvine) had a ringside seat at the great Orange County, California, financial debacle of 1994. He gives readers information about the major players and a thorough analysis of the esoteric financial instruments that provided the vehicle by which the treasurer, Robert Citron, bankrupted the county after losing $1.5 billion. Readers unfamiliar with financial jargon may find the chapters detailing the high-flying world of repos and derivatives heavy going, but those interested in learning what really happened in Orange County will find that time invested in Jorion's book is well spent. Recommended for public and academic libraries.-Andrea C. Dragon, Coll. of St. Elizabeth, Convent Station, N.J.

Philippe Jorion, Professor and Corporate Partners Research Scholar at the University of California at Irvine, teaches courses in Futures and Options, International Financial Management, and International Portfolio Management. He has an MBA and a Ph.D. in International Finance from the University of Chicago and has taught at Columbia University, the University of Chicago, Northwestern University, INSEAD, and the University of British Columbia. He has authored more than fifty publications on topics such as global portfolio investments and derivative markets.