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.