May 8 (Bloomberg) -- A few months ago, Bloomberg News reporter Caroline Byrne chronicled a British divorce court's chilling new open-handedness with the ex-wives of rich businessmen. ...The situation for rich men has grown so dire that a U.K. divorce lawyer named Jeremy Levison now tells his clients: "Don't get married. If you must, make sure your other half is as rich as you."

British law has now put a fine point on a question that has been hovering over Wall Street for a long time now, and grown more interesting with each tic upward in hedge-fund pay: Why does Wall Street Man get married at all? ...I was curious if there might not be a more plausible explanation why so many young men who set out so single-mindedly to become rich on Wall Street ignore the British divorce lawyer's sage advice.

To find it I called a man who now runs a very successful hedge fund, and who, before he set off on his own, had a very successful career pricing complex securities for big Wall Street firms. He was a quant with horse sense -- just the sort of person the market would turn to if they wanted to put a price on something that seemed unpriceable.

I asked this man to value a new security: a call option on half the expected earnings of a Wall Street trader or investment banker. Not of a banker or trader who already has made huge sums of money, but a banker or trader who is just launching his career, with dollar signs in his eyes. What, in effect, would a smart hedge-fund manager pay to marry a first-year associate at Goldman Sachs Group Inc.?

Because this hedge-fund manager knew especially well the fancy end of Wall Street, his assumptions were as interesting as his analysis. He began with a back-of-the-envelope calculation of the present value of the expected future earnings of a banker who made it Big Time, or BT: $25 million was about the right number, he guessed.

He then further assumed -- again, drawing on his experience of many years watching young men trying to get really, really rich -- that about one in 25 who start out in Wall Street jobs actually make the BT. He then calculated something he called the Market Price of Risk, or MPR, which he described as "an adjustment that makes risky propositions just as attractive as other investments in the world.''

Formula for Truth
He felt reasonably sure -- here he drew some analogy to pricing of options on catastrophe bonds -- that in this case the MPR should range from 0.5 to 0.75. He conceded that he'd fudged quite a bit. He completely ignored the value of the intermediate cases -- the guys who didn't make the BT but still amassed several million dollars. His goal was not smart-bomb accuracy but to land in the general vicinity of truth.

When he was finished he had a formula: (BT/25 x MPR). And when you plugged into it all his assumptions about risk, likelihood of making the Big Time, etc., that formula yielded a number. But that number had to be divided by two, as the divorcing wife/ex-wife would be given at most a half share.

"In a reasonably competitive market for marriages to junior bankers,'' he concluded, "you might expect to see $187,500 to $375,000 being invested toward getting a junior banker to the altar.'' And then he realized: "I didn't even take taxes into account."

Who Got Stiffed?
People will quibble with his calculation. Valuation models will no doubt improve, if this market ever gets going. But the hedge-fund quant's number does raise an interesting possibility: that all these newly rich hedge-fund managers who now find themselves paying tens of millions of dollars to their ex-wives had a pretty clear idea, when they got married, of the value of what they were selling. And it wasn't that high.

It's not the Wall Street traders who failed to run the numbers and, as a result, got stiffed in the deal. It's the women who married them. -- Commentary by Michael Lewis