Adverse Risk Incentives and the Design of Performance-Based Contracts
用期权定价理论分析现有绩效费用合约，指出某些合约可能诱导投资经理不当调整投资组合风险，并给出避免不利风险激励的合约参数条件。
This paper uses option pricing theory to value and analyze many performance-based fee contracts that are currently in use. A potential problem with some of these contracts is that they may induce portfolio managers to adversely alter the risk of the portfolios they manage. The paper is prescriptive in that it presents conditions for contract parameters that provide proper risk incentives for classes of investment strategies. For buy-and-hold and rebalancing strategies adverse risk incentives are avoided when the penalties for poor performance outweigh the rewards for good performance.