A Bank Is Establishing a Fixed Income Trading Department

question 50

Multiple Choice

A bank is establishing a fixed income trading department.It is considering whether to hire a team of star traders or to invest a similar sum of money in developing a proprietary,automated trading system.The most valid reason for investing in the automated trading system in preference to hiring star traders is:

• A)The proprietary trading system is likely to generate better returns since star traders are in a powerful position to negotiate pay packages which appropriate the major part of the profit they create
• B)Advanced software is better than human intuition at identifying mispricing in financial markets
• C)Star traders are difficult to manage and can easily become "rogue traders"
• D)It's difficult to motivate traders once they have earned their first few million.

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Definitions:

Emerge

To come into existence or become apparent, often gradually or out of a previous state or condition.

Group Project

A collaborative effort where individuals work together towards a common goal or to complete a task.

Communicating

The process of exchanging information or ideas through verbal, written, or non-verbal means to achieve understanding or share meanings.

Information Power

A form of power based on controlling access to information that is needed by others.