We study the problem of a fund manager whose compensation depends on the relative performance with respect to a benchmark index. In particular, the fund manager's risk-taking incentives are induced by an increasing and convex relationship of fund flows to relative performance. We consider a...

The reward of a fund manager usually increases when the Asset Under Management (AUM) grows, while it decreases when the AUM shrinks. The AUM may grow either because of a higher value of the assets or because of new money flowing into the fund. Good performances of the fund with respect to its...

We measure, in terms of expectation and variance, the cost of hedging a contingent claim when the hedging portfolio is re-balanced at a discrete set of dates. The basic point of the methodology is to have an integral representation of the payoff of the claim, in other words to be able to write...