论文信息 - Adverse risk incentives and the design of performance-bases contracts

Adverse risk incentives and the design of performance-bases contracts

This paper uses option pricing theory to value and analyze many performance-based fee contracts that are currently in use. A potential problem with some of these contracts is that they may induce portfolio managers to adversely alter the risk of the portfolios they manage. The paper is prescriptive in that it presents conditions for contract parameters that provide proper risk incentives for classes of investment strategies. For buy-and-hold and rebalancing strategies adverse risk incentives are avoided when the penalties for poor performance outweigh the rewards for good performance.

Sheridan Titman | Mark Grinblatt | S. Titman | Mark Grinblatt

[1] Andrew Rudd,et al. Incentive Fees: Who Wins? Who Loses? , 1987 .

[2] S. Titman,et al. How clients can win the gaming game , 1987 .

[3] M. Kritzman. Incentive Fees: Some Problems and Some Solutions , 1987 .

[4] S. Ross,et al. The valuation of options for alternative stochastic processes , 1976 .

[5] M. C. Jensen. The Performance of Mutual Funds in the Period 1945-1964 , 1967 .

[6] F. Black,et al. The Pricing of Options and Corporate Liabilities , 1973, Journal of Political Economy.

[7] Stephen L. Nesbitt,et al. Performance Fees for Investment Management , 1987 .

[8] Michael J. Brennan,et al. The Pricing of Contingent Claims in Discrete Time Models , 1979 .

[9] Sudipto Bhattacharya,et al. Delegated portfolio management , 1985 .

[10] Eduardo S. Schwartz. The Pricing of Commodity‐Linked Bonds , 1982 .

[11] D. Heckerman. Motivating managers to make investment decisions , 1975 .

[12] William Margrabe. The Value of an Option to Exchange One Asset for Another , 1978 .

[13] M. Rothschild,et al. Increasing risk: I. A definition , 1970 .

[14] R. Green,et al. Investment incentives, debt, and warrants , 1984 .

[15] R. Geske. THE VALUATION OF COMPOUND OPTIONS , 1979 .

[16] Incentive Fees: The Basic Issues , 1987 .