Case Study — Phone a Friend

I’ve developed solutions for many different businesses. One of the reasons I am effective is because I maintain relationships in a variety of industries and I’m able to ask an expert for advice on a particularly thorny problem. 

When I worked at Intercontinental Exchange, I was asked to price a new semi-exotic type of electricity option that was going on the platform for trading and clearing. After considering and researching the product, I did not see a good way to price it.

I reached out to a friend who was one of the largest options traders in U.S. power and we walked through it together. He explained to me that the product was not easily hedged and was unlikely to trade significant volumes. As we went through the math, I too became convinced that this product would not drive much new revenue for ICE. A trader shorting the option would not be able to cleanly hedge their risk with other products traded on the exchange. 

I shared my concerns with my manager and the project lead for the roll-out. I was told that there was lots of demand for the option and was instructed to continue working on the pricing model.

A few days later, the ICE Chief Strategy Officer dropped by my desk. He wanted to know why I felt the new electricity option was going to fail. I explained my position in detail. The CSO thanked me for my candor.

The project leader managed to release the product, but volumes were very weak. The product was retired three months later. 

When working on complex projects, it is important to seek critical feedback and incorporate it. I did not prevent the waste of resources in this instance. I share the example to offer insights into how I solve problems and how I’m confident, after proper research, to respectfully challenge consensus.