scholarly journals Catastrophe Aversion and Risk Equity in an Interdependent World

2018 ◽  
Vol 64 (10) ◽  
pp. 4490-4504 ◽  
Author(s):  
Carole Bernard ◽  
Christoph M. Rheinberger ◽  
Nicolas Treich
Keyword(s):  
Risk Equity

Designing Bankers’ Pay: Using Contingent Capital to Reduce Risk-Shifting Incentives

2021 ◽  
pp. 2240005
Author(s):  
Jens Hilscher ◽  
Sharon Peleg Lazar ◽  
Alon Raviv
Keyword(s):  
Capital Structure ◽  
Convertible Bonds ◽  
Risk Shifting ◽  
Asset Risk ◽  
Contingent Capital ◽  
Risk Equity ◽  
Increase Risk ◽  
Reduce Risk ◽  
The Capital Structure

Including contingent convertible bonds (coco) in the capital structure of a bank affects the sensitivity to risk of its equity-based compensation. Such risk-shifting incentives can be reduced if the coco bonds are well-designed. Similarly, we show that compensating executives with well-designed coco bonds can also reduce risk-shifting incentives. In practice, however, most coco bonds have characteristics that result in both stock and coco compensation having large sensitivities to changes in asset risk — equity-based compensation encourages executives to increase risk, coco compensation to reduce risk. We show that a pay package combining both stock and coco can practically eliminate risk-shifting incentives and that it can be implemented with a bank’s preexisting coco bonds.

Introduction: Risk, Equity, and Schooling: Transforming the Discourse

2009 ◽  
Vol 33 (1) ◽  
pp. vii-xi ◽  
Author(s):  
Vivian L. Gadsden ◽  
James Earl Davis ◽  
Alfredo J. Artiles
Keyword(s):  
Risk Equity
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