When thinking of Hollywood, rarely do we imagine a movie that we can learn something from. Rather, we expect an engaging story, impressive special effects and acting and an overall pleasant viewing experience.

However, there are some movies that stand out from the crowd based on their theme and what the audience may be able to take away from viewing the film. 

Movies about financial trading fall under this category, as despite the ubiquitous nature of the financial markets, your average moviegoer may not be familiar with the world of high finance at all. 

One such movie is the 2011 financial drama ‘Margin Call’, which is directed by J.C. Chandor, starring Kevin Spacey, Zachary Quinto, Jeremy Irons and others.

The movie revolves around a Wall Street Investment bank as its employees try to grapple with the oncoming financial crisis of 2007-08. 

There are a few key aspects of investing and trading that the movie touches upon, which may be particularly interesting for young aspiring financial professionals. 

Important aspects of finance depicted in ‘Margin Call’

High finance can be a very competitive and challenging environment that requires cutting edge technology, critical and creative thinking and a deep knowledge of the financial markets.

Below we can pinpoint some of the most important aspects of investing and trading the movie touches on and explain why each of them are important and crucial to understand for any financial professional. 

Risk management

Complex financial derivatives 

Importance of due diligence

You may have heard this term before, but due diligence is half the work when it comes to choosing what to trade and invest in and what to avoid at all costs.

Due diligence is the process of gathering and checking all the relevant information that can help you assess the viability of an investment, such as:

  • The financial health of the company issuing a particular security
  • The terms and conditions of a particular financial instrument and their issuance
  •  The multitude of risks an investment could be exposed to and the severity of their impact 

The movie shows investment bankers analyzing fundamental factors underlying the mortgage-backed securities that ultimately led to the financial crisis. Each of these mortgage-backed securities were bundled into credit default swaps, which were sold as derivatives among banks and to the broader public as investment vehicles for betting on the U.S. housing market, which was considered to be solid at the time. 

Systemic risks

The advent of financial derivatives and the digitization of financial markets, the systemic risks that exist on the global markets have only been exacerbated. 

For this reason, a lack of regulatory oversight, or malregulation, could lead to devastating consequences for millions of everyday people that may have no interest or involvement in the markets, which holds the power to destabilize not only Wall Street, but the entire global economy, as seen in ‘Margin Call’. 

Ethics 

The personal ethics of the movie’s characters are called into question, as are the executives that willingly turned a blind eye on what was an immensely overleveraged housing market at the time. 

This highlights the importance of ethics in the world of finance, as unsustainable malinvestment can hurt even the entities that benefit greatly from short-term market fluctuations.