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TITLE: Money Management with Performance Fees
SPEAKER: Daniel Mitchell
ABSTRACT:
Hedge fund contracts are generally characterized by a flat fee, a performance fee and what are
know as high-water-mark provisions. This paper describes and characterizes these contract
features and analyzes how they influence the hedge fund's risk choices. We model the hedge
fund's portfolio choice as a stochastic control problem with hybrid discrete and continuous controls. We develop a computational method to solve this class of problems and prove its convergence.
