ROE hurdles cause pricing impasse


Capital is the great constraint on derivatives businesses these days, so it makes sense that their performance should be measured as the revenue bang for the regulatory buck – return on equity (ROE) under Basel III. That sounds simple enough, but while it's easy to set bank-wide or business-wide ROE hurdles, applying them on a trade-by-trade basis is creating a mind-boggling array of problems for pricing and organisation.

"Through the hurdle rates, capital is increasingly becoming the driver of

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