Home  

Exercising the 'Traders Option'

The problem of risk-asymmetry and risk vs. reward in the world of finance.

As current events in the financial markets unfold, there has been some criticism of the levels of remuneration paid to senior bankers and other financiers. There is a common perception of a significant imbalance between risk and reward.

One answer is to reward executives according to their 'risk-adjusted' performance. Some of these arguments reminded me of a risk management phenomenon known as the Trader's Option within the banks in the City.

Read more...

Should Banks be Able to Use Mortgage Debt To Raise Finances From Government?

This morning's news highlighted some further developments in the current catalogue of economic woes.

Read more...

The Irony of 'Moral Hazard'

An Issue of Tough Market Reality Rather Than Abstract Morality

Why 'Moral Hazard' is a more important issue than some people have realized.

Read more...

The Problem With Using Credit Grades To Quantify Portfolio Credit Risk

We look at some of the issues around doing quantitative risk analysis based on credit grades.

Read more...

We Don't Have Earthquakes In Britain

A financial lesson we should have learn from Japan

In our opinion there are important lessons to be learnt from recent history in Japan.

Read more...

A Risk Manager Called 'Cassandra'

Where were the risk managers?

Recent events appear to suggest that risk management in some financial institutions has left something to be desired - so where were the risk managers?

Read more...

The Risk Implications of Complex Markets

Lessons From Lloyds of London And A Spider's Web

We consider whether an increasingly complex and inter-connected financial system is necessarily a safer one.

Read more...

The Escalating Cost of Some Computer Systems

Perhaps Thomas Moore had a Point

When looking at the reported escalating costs of some computer systems, a quote from Thomas Moore comes to mind.

Read more...