The Mathematics of Hedge Fund Fees
Asset managers collect fees, from investors, which are dependent on the future performance of the investments they manage, and therefore stochastic. A new type of business is developing where the managers offer the investors certain forms of loss protection. In this talk we will review some of them, and will propose a cost/benefit analysis using the Black-Scholes option pricing framework, which will show that in some situations, the manager can actually end up paying the investor.
Luis Seco is a Professor of Mathematics at the University of Toronto, where he also directs the Mathematical Finance Program and the RiskLab, a research laboratory that specializes in risk management research. He is the President and CEO of Sigma Analysis & Management, an asset management firm that provides hedge fund investment products that employ managed account structures to create products with unique transparency, analytics and liquidity characteristics. He holds a PhD in Mathematics from Princeton and was a Bateman Instructor at the California Institute of Technology.
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