G2TT
来源类型Discussion paper
规范类型论文
来源IDDP8816
DP8816 Competition for traders and risk
jan boone; Gijsbert Zwart
发表日期2012-02-01
出版年2012
语种英语
摘要The financial crisis has been attributed partly to perverse incentives for traders at banks and has led policy makers to propose regulation of banks' remuneration packages. We explain why poor incentives for traders cannot be fully resolved by only regulating the bank's top executives, and why direct intervention in trader compensation is called for. We present a model with both trader moral hazard and adverse selection on trader abilities. We demonstrate that as competition on the labour market for traders intensifies, banks optimally offer top traders contracts inducing them to take more risk, even if banks fully internalize the costs of negative outcomes. In this way, banks can reduce the surplus they have to offer to lower ability traders. In addition, we find that increasing banks' capital requirements does not unambiguously lead to reduced risk-taking by their top traders.
主题Financial Economics ; Industrial Organization
关键词Financial institutions Imperfect competition Optimal contracts Remuneration policy Risk
URLhttps://cepr.org/publications/dp8816
来源智库Centre for Economic Policy Research (United Kingdom)
资源类型智库出版物
条目标识符http://119.78.100.153/handle/2XGU8XDN/537652
推荐引用方式
GB/T 7714
jan boone,Gijsbert Zwart. DP8816 Competition for traders and risk. 2012.
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