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.
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.
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.
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.
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.
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?
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.
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.