Orange County: A Case of Derivative Mismanagement

Code : INB0010

Year : 2011

Industry : Not Applicable

Region : US

Teaching Note:Available

Structured Assignment :Not Available

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Abstract: This case study discusses the first ever bankruptcy of any County in the history of the US. It discusses Orange County's investment pool funds and its (mis)management by its treasurer – Robert Lafee Citron (Citron).

The case study describes how Citron put investors’ funds into risky derivative instruments to earn superior returns without proper assessment of risk.

It compiles the chronological events which led to the bankruptcy of Orange County (OC).


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Pedagogical Objectives:

  • Demonstrate the importance of risk management while investing in derivative instruments
  • Explain the mechanism of Structured Notes and the effect of leverage
  • Demonstrate the reasons and impact of Orange County's Bankruptcy
  • Highlight the lessons learnt from the bankruptcy of Orange County


    Keywords : Risk Management, Financial Risk Management, Orange County, Robert Lafee Citron, Mismanagement, Derivatives, Investment Strategies, Bankruptcy, LIBOR, Treasurer

    Contents :
    » Orange County's Treasurer - Robert Lafee Citron
    » Changing Interest Rate scenario
    » The Orange County Bankruptcy


    Case Introduction >>


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