The paper analyzes asset pricing implications of commonly used performance fees linking the compensation of fund managers to the return of the managed portfolio relative to that of a benchmark portfolio. Symmetric(fulcrum) performance fees distort the allocation of managed portfolios in a way...

This paper examines optimal consumption and investment choices and the cost of hedging contingent claims in the presence of margin requirements or, more generally, of nonlinear wealth dynamics and constraints on the portfolio policies. Existence of optimal policies is established using...

We examine the extent to which an investor's preferences and beliefs are uniquely determined from knowledge of the equilibrium prices and of his/her consumption strategy. More precisely, we assume that the investor's preferences admit an expected utility representation, but with subjective...

This paper constructs a representative agent supporting the equilibrium allocation in ¡°event-tree¡± economies with time-additive preferences and possibly incomplete securities markets. If the equilibrium allocation is Pareto optimal, this construction gives the usual linear welfare...