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Employment derivatives: Difference between revisions
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So began the sad chronicle of employment rate swap mis-selling. The scandal blew up when it emerged HR departments were being incentivised to “pi-hack” their employment derivatives portfolios by arbitrarily placing employees on performance management, covertly arranging other firms to bid them away or just peremptorily laying them off, leaving redundant staff holding twenty-five year, deep [[out-of-the-money]] employment rate swaps but no actual job to hedge with it. Being the sort of people who would sling their redundancy payoffs into Dogecoin these people were doubly exposed should [[crypto]] go [[Seins en l’air|''titten hoch'']]. | So began the sad chronicle of employment rate swap mis-selling. The scandal blew up when it emerged HR departments were being incentivised to “pi-hack” their employment derivatives portfolios by arbitrarily placing employees on performance management, covertly arranging other firms to bid them away or just peremptorily laying them off, leaving redundant staff holding twenty-five year, deep [[out-of-the-money]] employment rate swaps but no actual job to hedge with it. Being the sort of people who would sling their redundancy payoffs into Dogecoin these people were doubly exposed should [[crypto]] go [[Seins en l’air|''titten hoch'']]. | ||
Though self-referencing employment derivatives are now prohibited in many jurisdictions, no-one was brought to book for these poor selling practices. Nevertheless, interests in ERS hedging waned shortly afterward, as other incidents came to light. Some were faintly comical: during the [[COVID-19]] pandemic, a human resources trader at Wickliffe Hampton inadvertently opted for physical settlement by ticking the wrong box on a portfolio swap [[Confirmation - ISDA Provision|confirmation]] and had to deliver his entire HR department into a chain of patisseries that had just gone insolvent. At first, the team of thirty short-order cooks that turned up at Wickliffe Hampton’s London headquarters caused an uproar, but morale quickly markedly, no-one missed the performance appraisal process and the morning teas were pronounced by all to be “excellent”. In any case, there were fewer complaints than usual when, at the end of the year, there were [[donut]] | Though self-referencing employment derivatives are now prohibited in many jurisdictions, no-one was brought to book for these poor selling practices. Nevertheless, interests in ERS hedging waned shortly afterward, as other incidents came to light. Some were faintly comical: during the [[COVID-19]] pandemic, a human resources trader at Wickliffe Hampton inadvertently opted for physical settlement by ticking the wrong box on a portfolio swap [[Confirmation - ISDA Provision|confirmation]] and had to deliver his entire HR department into a chain of patisseries that had just gone insolvent. At first, the team of thirty short-order cooks that turned up at Wickliffe Hampton’s London headquarters caused an uproar, but morale quickly markedly, no-one missed the performance appraisal process and the morning teas were pronounced by all to be “excellent”. In any case, there were fewer complaints than usual when, at the end of the year, there were [[donut]]s for everyone. | ||
==== Conclusion ==== | ==== Conclusion ==== | ||
{{Drop|E|mployment swaps now}} may seem like just the last apocalyptic sign of an over-bought market, drunk on exuberance and about to hit the buffers, but the thinking behind them is sound, and their place in the history of over-the-counter derivatives should not be forgotten. They illustrate the power, potential and pitfalls of these “weapons of financial mass destruction”.{{Sa}} | {{Drop|E|mployment swaps now}} may seem like just the last apocalyptic sign of an over-bought market, drunk on exuberance and about to hit the buffers, but the thinking behind them is sound, and their place in the history of over-the-counter derivatives should not be forgotten. They illustrate the power, potential and pitfalls of these “weapons of financial mass destruction”. | ||
{{Sa}} | |||
*[[Interest rate swap mis-selling scandal]] | *[[Interest rate swap mis-selling scandal]] | ||
*[[Credibility derivatives]] | *[[Credibility derivatives]] | ||
{{ref}} | {{ref}} | ||