Abstract
This paper extends the pricing of the hedge fund compensation contracts to the case of ambiguity over the appropriate valuation approach originating from market incompleteness. It predicts that an increase in the level of Knightian uncertainty causes the erosion of the values of the fees and the claim, while an increase in the degree of market incompleteness (specified by the correlation between market asset and the fund’s asset or the volatility of non-diversifiable risk) has non-monotonic effects.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
