kaal:claim:1428387-021

The principal-agent problem in complex financial products is exacerbated by hierarchies in financial institutions, which create multiple layers of agency relationships between the traders using the products and the principals bearing the real economic risk.

Source quote, verbatim

The principal-agent problem is further exacerbated by hierarchies in financial institutions that often create multiple layers of agency relationships to trade and invest in complex financial products.

From

Kaal, Hedge Fund Valuation Retailization, Regulation, and Investor Suitability (2009), V.A.1 Hierarchies in Financial Institutions, p. 41
https://ssrn.com/abstract=1428387 · source PDF

Cite as

Kaal, Hedge Fund Valuation Retailization, Regulation, and Investor Suitability (2009). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1428387

Holds when

in banks and large institutions trading complex financial products

Classification

mechanismsupport: arguedai-and-agentscorporate-governancerisk-and-incentives

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