Bankers Need Safety Nets Not Carrots To Take Risks

Conventional wisdom says that if you offer traders stock options, which pay out if the firm performs well, they will take more risk in order to boost their performance and get paid more.

  • 02 May 2004
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Conventional wisdom says that if you offer traders stock options, which pay out if the firm performs well, they will take more risk in order to boost their performance and get paid more. Stephen Ross, Franco Modigliani professor of finance and economics at the Sloan School at the Massachusetts Institute of Technology, however, argued, "To make agents more willing to take risks there should be more of a focus on offering downside protection than on offering them upside potential." But, he quipped, "Not so much that their best outcome is the firm goes belly up."

Ross said the high delta of call options means employees get nervous and become risk averse in order to protect their wealth. The put options still add convexity into employees' remuneration and therefore encourage outperformance, explained Ross.

One practitioner, however, said bankers rarely look at their options when calculating their net worth because they frequently leave the firm before the options vest. In addition, most staffers lack the ability to move a firm's share price, he added.

  • 02 May 2004

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 346,069.71 1350 8.09%
2 JPMorgan 342,066.65 1471 7.99%
3 Bank of America Merrill Lynch 307,117.30 1065 7.18%
4 Barclays 258,537.34 976 6.04%
5 Goldman Sachs 227,890.51 774 5.33%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 BNP Paribas 48,550.02 206 6.54%
2 JPMorgan 46,311.15 105 6.24%
3 UniCredit 40,595.43 182 5.47%
4 SG Corporate & Investment Banking 38,348.83 146 5.17%
5 Credit Agricole CIB 38,097.35 189 5.13%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 14,514.87 63 9.19%
2 Goldman Sachs 13,469.15 66 8.53%
3 Citi 9,971.36 58 6.32%
4 Morgan Stanley 8,572.10 54 5.43%
5 UBS 8,414.70 37 5.33%