82,853
edits
Employment derivatives: Difference between revisions
no edit summary
Amwelladmin (talk | contribs) No edit summary |
Amwelladmin (talk | contribs) No edit summary |
||
| Line 79: | Line 79: | ||
So began the sad chronicle of employment rate swap mis-selling. In this dark episode, banks would separate the employee’s fixed rate, and pay that under a physical employment contract, then separately hedge out their [[π]] risk with a linked derivative. Before the emergence of ERS, the [[π]] risk was intrinsic to the employment contract and could not be abstracted and traded separately. | So began the sad chronicle of employment rate swap mis-selling. In this dark episode, banks would separate the employee’s fixed rate, and pay that under a physical employment contract, then separately hedge out their [[π]] risk with a linked derivative. Before the emergence of ERS, the [[π]] risk was intrinsic to the employment contract and could not be abstracted and traded separately. | ||
The scandal blew up when it emerged HR departments were being offered incentives to place employee counterparties on performance management, arranging with other firms to bid them away or just peremptorily | The scandal blew up when it emerged HR departments were being offered incentives to place employee counterparties on performance management, arranging with other firms to bid them away or just peremptorily laying them off, leaving staff holding a twenty-five year [[out-of-the-money]] employment rate swaps with no actual job, and badly exposed should [[crypto]] go [[tits up]]. | ||
Such “self-referencing employment derivatives” are now not permitted in many jurisdictions, and attract penalty risk weighing in the UK. | Such “self-referencing employment derivatives” are now not permitted in many jurisdictions, and attract penalty risk weighing in the UK. | ||