The paper examines the management of traders in financial markets from the
perspectives of agency and prospect theory. Using interview data from a sam
ple of traders and managers in four investment banks, the paper argues that
managers focus on avoiding losses rather than making gains. This focus eme
rges from the characteristics of managers and the nature of their role. The
implications for agency and prospect theory, together with the policy issu
es for managers, are discussed. (C) 2001 Elsevier Science Ltd. All rights r
eserved.