Les stratégies 'stop-loss': théorie et application au Contrat Notionnel du Matif

Bernard Bensaid and Olivier de Bandt

Annals of Economics and Statistics, 2000, issue 58, 21-56

Abstract: To explain the existence of "stop-loss" rules in financial institutions, we develop a principal/agent model, where an investment firm relies on a trader to invest in a risky asset like a future contract. When the trader faces a limited liability constraint, the investment firm may increase its gains by committing to force the trader to liquidate the position when very low results are observed. The empirical analysis of the daily positions on the French Treasury bond future market confirms such a conclusion for 20% of individual accounts.

Date: 2000
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Related works:
Working Paper: Les strategies de "Stop Loss": Theorie et application au contrat notionnel du MATIF (1996)
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:2000:i:58:p:21-56

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