Traders working for banks are subject to the ________.

Question

BlackTom AI · Accepted Answer

The question asks about a specific risk or issue that arises with workers (traders) who operate on behalf of banks. 
Option 1: 'free-rider problem' typically refers to a situation in public goods where individuals benefit from a resource without contributing to its provision. This doesn’t capture the dynamic between bank owners and their traders. 
Option 2: 'double-jeopardy problem' is not a standard or recognized term in economics or corporate governance related to banking/trading relationships. It misframes the issue. 
Option 3: 'exchange-risk problem' would imply risk arising from differences in exchange rates or currency-related issues, which is not the core governance/incentive concern described when traders work for banks. 
Option 4: 'principal-agent problem' correctly identifies the core dynamic: the principal (bank shareholders or owners) hires an agent (traders/managers) to act on their behalf, but the agent may pursue incentives that diverge from the principal’s interests due to information asymmetry, risk tolerance, compensation structures, and moral hazard. This misalignment can lead to excessive risk-taking or other behavior not aligned with the principals’ goals. 
In summary, only the principal-agent framework appropriately describes the relationship and potential conflicts between banks (principals) and their traders (agents). The other options describe phenomena that do not fit this particular employer–employee/governance context.

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Traders working for banks are subject to the ________.

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ECON 206-PTS2-Online Final- Requires Respondus LockDown Browser

Traders working for banks are subject to the ________.

View Explanation

Log in for full answers

Similar Questions

Part 1Asymmetric information in equity contracts is known as the​ ______________ problem because the manager of the firm has fewer incentives to maximize profits than the stockholders might ideally prefer. Part 2 A. debt deflation B. ​principal-agent C. ​free-rider D. adverse selection

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A product has a selling price of $20, a contribution margin ratio of 40% and fixed cost of $120,000. To make a profit of $30,000. The number of units that must be sold is: Type the number without $ and a comma. Eg: 20000

Which of the following statement regarding cost is correct:

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More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

Part 1Asymmetric information in equity contracts is known as the ______________ problem because the manager of the firm has fewer incentives to maximize profits than the stockholders might ideally prefer. Part 2 A. debt deflation B. principal-agent C. free-rider D. adverse selection