Bonus schemes and trading activity

Risk-Management Lessons from Bonus Schemes

Management compensation packages typically include some form of bonus payment; these payments shall provide incentives for effort, but recently they were heavily criticized for their perceived excessive risk-taking incentives. This paper presents a continuous-time model in which the manager decides on the risk and effort level of the bank. A single-period model is nested into continuous-time; f...

Market Design for Emission Trading Schemes

This paper is concerned with the mathematical analysis of emissions markets. We review the existing quantitative analyses on the subject and introduce some of the mathematical challenges posed by the implementation of the new phase of the European Union Emissions Trading Scheme as well as the cap-and-trade schemes touted by the US, Canada, Australia and Japan. From a practical point of view, th...

Properly designed emissions trading schemes do work !

Lessons learned from previous emissions trading schemes

Designing an emissions trading scheme requires in-depth knowledge about several aspects. This paper attempts to clarify some important design points of the forthcoming emissions trading scheme for aviation under the EU ETS. Five general key points of system design are acknowledged and comparisons are made to previous and current emission trading schemes. Above all, it is argued that initial all...

Distribution of Trading Activity

There has been a wide debate on whether democracy actually has an effect on economic outcomes, and especially on international trade. With a new estimation strategy, we analyze this relationship taking a look at the distribution of countries’ trading activity. Using a panel quantile estimation framework from Powell (2014), we find a stronger relationship at the lower quantiles, especially for t...