The standard formula of the Solvency II framework employs an approximate value-at-risk approach to define risk-based capital requirements. The parameterization of the standard formula determines how much additional capital insurers need in order to back investments in risky assets. This paper...

Hedge fund managers are compensated via management fees on the assets under management (AUM) and incentive fees indexed to the high-water mark (HWM). We study the effects of managerial skills (alpha) and compensation on dynamic leverage choices and the valuation of fees and investors' payoffs....