Margin Call (2011)

Trader's Film Library #1 · Markets and trading in fiction. The best film about risk: required viewing for anyone who trades with leverage.

Original title: Margin Call · Type: film · Created by: J.C. Chandor · Usefulness for traders: ★★★★★

What it's about

24 hours in an investment bank at the start of the 2008 crisis. Young risk analyst Peter Sullivan (Zachary Quinto) discovers that the bank's portfolio has exceeded its historical volatility limits and that a small fall in asset prices could exceed the value of the entire firm. Overnight, the management has to decide what to do.

What it has to do with markets

One of the most realistic films about finance. It shows risk models, limits, leverage, liquidity and the dilemma: sell toxic assets to clients knowing they'll lose, or go under. Bank chief John Tuld (Jeremy Irons) sums it up with his line about the three ways to make money: be first, be smarter or cheat.

Lessons for traders

• risk calculated on historical data fails when the market moves beyond history
• in a panic, whoever sells first wins (liquidity disappears)
• leverage turns a small move into a disaster
• decisions under time pressure and fear (the empathy gap, Atlas of biases #49)

What to watch out for

The bank is fictional, but the situation resembles the first days of the crisis at several real banks.

Discussion

The discussion takes place in Hetman Capital Club (in Polish). Join the discussion in the Club →

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The description outlines the plot without revealing the ending where possible (true stories have a known outcome). Educational content, not investment advice.