Brendan Mcdermid/Reuters

When will Wall Street stop springing these types of nasty surprises?

Every big bank has risk controls. Teams of executives are assigned to manage and review trades to ensure the bank’s safety and health.

Yet trading debacles happen with surprising regularity.

Last year, losses at two big institutions rocked the financial world. MF Global went out of business after making an ill-timed bet on European debt. Before that, a UBS trader in London lost the firm $2.3 billion. The 2008 financial crisis was the result of major risk miscalculations that brought down several big financial institutions, including Bear Stearns, Lehman Brothers and the American International Group.

Now, JPMorgan Chase faces its own mess.

While JPMorgan has long been regarded as one of the nation’s strongest banks, the circumstances surrounding its $2 billion trading loss look depressingly familiar. Once again, a bank with large trading operations allowed a mixture of incompetence, risk-taking, hubris and complexity lead to an embarrassing and costly blowup.

“This underscores the fallacy of thinking the best-managed banks are somehow infallible,” said Sheila C. Bair, the former chairwoman of the Federal Deposit Insurance Corporation, a bank regulator.

In the aftermath of the financial crisis, big banks said they had learned their lessons. Financial executives claimed they had tempered the risk on their balance sheets and pulled back from making large bets with their own money, even before regulators devised new rules to stop proprietary trading at government-backed banks.

“In a risk-taking business, it is easy to generate increasingly better results in the short run by taking on excessive risk or by building lower-quality business — but you will pay for that in the long run,” Jamie Dimon, JPMorgan’s chief executive, wrote in a note to shareholders in 2011.

But banks are still driven by profits, and concerns remain that financial firms are making risky bets under the guise of more mundane activities.

Large banks continue to make trades with their own money, saying they are part of broader hedging strategy. The activities, the firms argue, are meant to offset various risks across the bank and to protect their profits.

But at JPMorgan, the group responsible for its hedging activities, the so-called chief investment office, had gained a reputation in recent years for its trading prowess. In some ways, it became a profit center for the bank at a time when the industry earnings were under pressure. In the three years through the end of 2011, the unit racked up $5.4 billion of gains on its securities.

Now, the group’s fortunes have reversed, and the firm is paying the price. On Thursday, Mr. Dimon conceded that the trades were “flawed” and “poorly monitored.”

“There is no safe way to getting risk management right because by its very nature risk is risk,” said one senior Wall Street executive who spoke on the condition of anonymity because he was prohibited from speaking publicly about the matter. “The issue is how you manage it, and you need a strong aversion to directional bets and big bets.”

The bank’s problems may have started with its bond portfolio, worth $379 billion at the end of March. JPMorgan had just 30 percent of its portfolio investment in securities guaranteed by the federal government or its agencies, generally considered some of the safest bonds. It was a shift from the end of 2010, when those types of bonds amounted to 42 percent.

At either level, JPMorgan looks like an outlier. By comparison, Bank of America had 87 percent of its bond portfolio, worth $293 billion, invested in such high-quality bonds in March.

With the growing risk in its bond portfolio, JPMorgan may have wanted to be more ambitious with its hedges. In hedging, the JPMorgan unit made heavy use of derivatives instruments whose prices are linked to the value of corporate bonds.

While the bank made both bullish and bearish bets with these instruments, it appears the trading strategy started losing a lot of money when the market turned against corporate bonds toward the end of March. JPMorgan gave no indication that the trade was going wrong its first-quarter earnings call on April 13. At the time, Mr. Dimon called concerns about the trades “a tempest in a teapot.”

One unnerving conclusion is that JPMorgan had little idea that the losses were brewing, a failing that often occurs at banks that suffer big trading hits.

One of Wall Street’s most widely used early-detection tools for losses is a computer model called value-at-risk, a measure of risk that JPMorgan bankers pioneered in the 1990s. The metric is supposed to give banks an estimate how much it could lose on average on a rough trading day, though such programs proved useless during the financial crisis.

“One point of having a value-at-risk model is to catch risky positions before they produce losses,” said John Sprow, chief risk officer at Smith Breeden Associates, a fund management firm.

On Thursday, Mr. Dimon explained how JPMorgan was tripped up with its value-at-risk measure. In the first quarter, he said, the bank deployed a new model that underestimated losses on the hedges that relied on credit derivatives. When it redeployed the old model, it nearly doubled the estimated potential losses in the chief investment office, where the hedges were done.

“That kind of change is ginormous,” said Mr. Sprow.

At the heart of the risk-management issue is whether the trades were truly hedges. It is hard to justify a position as a hedge if the trades cannot be sold quickly without destroying their value. Market participants say that JPMorgan had built up relatively large holdings in an obscure corner of the credit market. Exiting such trades could create outsize losses for the bank.

“I think JPMorgan is having trouble unwinding these transactions,” said Michael Greenberger, a professor at the University of Maryland School of Law who was a regulator at the Commodity Futures Trading Commission when the giant hedge fund Long Term Capital Management imploded in 1998. “This says there is poor risk management there.”

It would not be the first time that a bank had done an elaborate trade that looked initially like a hedge but later turned into a bad bet.

Another example is that of Howie Hubler, a Morgan Stanley trader whose efforts contributed to roughly $9 billion of losses at the firm during the financial crisis. He started out with a profitable bet against the subprime mortgage market, but his team later bought contracts that would allow the firm to profit if the subprime sector stabilized. Those latter bets proved extremely costly as the mortgage market continued to crumble.

The attitudes of a bank’s leaders can also stoke risk-taking activities at a bank. While Mr. Dimon managed to steer JPMorgan away from crippling losses during the financial crisis, he has been a vocal critic of new regulations that aim to rein in risk at banks, saying they restrict banks’ room to maneuver. The problem may be that JPMorgan, because of its size, has created a new risk: it’s too big to manage.

“Jamie Dimon has an overall strategy of which one part is this trade. This isn’t a crazy guy in London making a prop bet,” said Peter Tchir, a former head of index trading at RBS who now oversees the hedge fund TF Market Advisors. “But the scale of these banks and the size of the trades they have to make has gotten so big that even small moves in the market have big consequences and now have a whole market on tenterhooks.”

Julie Creswell contributed reporting.