We show that if an agent is uncertain about the precise form of his utility function, his actual relative risk aversion may depend on wealth even if he knows his utility function lies in the class of constant relative risk aversion (CRRA) utility functions. We illustrate the consequences of this...

We show that if an agent is uncertain about the precise form of his utility function, his actual relative risk aversion may depend on wealth even if he knows his utility function lies in the class of constant relative risk aversion (CRRA) utility functions. We illustrate the consequences of this...

In an ideal world asset managers would be perfectly aligned with their investors via an optimal incentive contract. In the current crisis this does not seem the case, so it is worthwhile to investigate how this can be improved upon. In the theory of delegated management this optimal (incentive)...

In an ideal world, the financial interests of asset managers would be perfectly aligned with those of their investors via optimal incentive contracts. In the real world, this is often not the case. It is worthwhile investigating how to improve the current situation. In the theory of delegated...

Recent research reveals that hedge fund returns exhibit a range of different,possibly non-linear pay-off patterns. It is difficult to qualify all these patternssimultaneously as being rational in a traditional framework for optimal financial decisionmaking. In this paper we present a simple...