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Disincentives for Risk-Taking in Mortgage and Other Financial Markets: Adjusting Management Remunerations
Rose Neng Lai1; Robert Van Order2
2013-11
Conference NameAREUEA 2014 Meeting
Source PublicationProceedings of AREUEA 2014 Meeting
Conference Date9th and Friday 11th July 2014
Conference PlacePhiladelphia, USA
Abstract

Guaranteed Financial Institutions can structure portfolios with imbedded options to take on excessive risk without paying for it. This provides an incentive to take on higher risk. This paper proposes variants on Contingent Convertible (CoCo) bonds to be mandatorily included in the management remuneration package as a disincentive to taking higher risk. We show how the conversion ratios of the CoCo bonds can affect managers' appetite towards risk-taking and how incentives can be set up to have management make choices consistent with those made under efficient pricing.

KeywordFinancial Institutions Contingent Convertible Bonds Management Incentives Risk-taking Dodd-frank Act
Language英語English
Fulltext Access
Document TypeConference paper
CollectionFaculty of Business Administration
DEPARTMENT OF FINANCE AND BUSINESS ECONOMICS
Affiliation1.University of Macau
2.George Washington University
First Author AffilicationUniversity of Macau
Recommended Citation
GB/T 7714
Rose Neng Lai,Robert Van Order. Disincentives for Risk-Taking in Mortgage and Other Financial Markets: Adjusting Management Remunerations[C],2013.
APA Rose Neng Lai,&Robert Van Order.(2013).Disincentives for Risk-Taking in Mortgage and Other Financial Markets: Adjusting Management Remunerations.Proceedings of AREUEA 2014 Meeting.
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