THE END-OF-THE-YEAR BONUS: HOW TO OPTIMALLY REWARD A TRADER?

H. Ahn (), Jeff Dewynne (), P. Hua (), Antony Penaud () and Paul Wilmott ()
Additional contact information
H. Ahn: Constellation Power Source Inc., 111 Market Place, Suite 500, Baltimore Maryland 21202, USA
Jeff Dewynne: Mathematical Institute, University of Oxford, 24–29 St Giles', Oxford OX1 3LB, UK
P. Hua: Merril Lynch Mercury Asset Management, 64 Parkview Road, Tottenham, London N17 9AX, UK
Antony Penaud: TMI, 6 Broadgate, London EC2M 2AA, UK
Paul Wilmott: Wilmott Associates, London, UK

International Journal of Theoretical and Applied Finance (IJTAF), 2002, vol. 05, issue 03, 279-306

Abstract: Traders are compensated by bonuses, in addition to their basic salary. However, little is known about how to optimally reward a trader. In this article we build a framework for the study of this problem and explore a variety of possible compensation structures.

Keywords: HJB equation; Sharpe ratio; Monte-Carlo simulations (search for similar items in EconPapers)
Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:wsi:ijtafx:v:05:y:2002:i:03:n:s0219024902001420

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DOI: 10.1142/S0219024902001420

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