During the first half of 2012, J.P. Morgan Chase lost billions of dollars from an exposure to a massive credit derivatives portfolio in its office, the notorious nickname for Bruno Iksil, who assumed massive exposures (masquerading as hedges) in a large credit derivative portfolio. Which of the following BEST summarizes the root cause of the debacle?

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Disclose the high risk assets in the SCP to reduce its Risk Weighted Assets (RWA).

A poor risk culture enabled by failures in corporate governance.

The chief investment officer (CIO) lacked the sophistication to correctly value certain credit derivatives.

The chief investment officer (CIO) used only one metric, value at risk (VaR), an overreliance owing to JPM's pioneering use of VaR.

Financial Risk Manager Part 1