This paper investigates a fund manager's risk-taking incentives induced by an increasing and convex fund-flows to relative-performance relationship. In a dynamic portfolio choice framework, we show that the ensuing convexities in the manager's objective give rise to a finite risk-shifting range...

Many carriers, such as airlines and ocean carriers, collaborate through the formation of alliances. The rules of alliances are important for both the stability of the alliance and the profitability of the alliance members. In this paper, we address the design of resource exchange alliances, a...

This article analyzes optimal, dynamic portfolio and wealth/consumption policies of utility maximizing investors who must also manage market-risk exposure using Value-at-Risk (VaR).We find that VaR risk managers often optimally choose a larger exposure to risky assets than non risk managers, and...

This article analyzes a dynamic general equilibrium under ageneralization of Merton's (1987) investor recognition hypothesis. A class of informationally constrained investors is assumed to implement only a particular trading strategy. The model implies that, all else equal, a risk premium on a...

We introduce an axiomatic definition of a conditional convex risk mapping and we derive its properties. In particular, we prove a representation theorem for conditional risk mappings in terms of conditional expectations. We also develop dynamic programming relations for multistage optimization...