Valuing Hedge Fund Fees
This thesis applies a Partial Integral Differential Equation model, along with a Monte Carlo approach to quantitatively analyze the no arbitrage value of hedge fund performance fees. From a no-arbitrage point of view, the investor in a hedge fund is providing a free option to the manager of the hedge fund. The no-arbitrage value of this option can be locked in by the hedge fund manager using a simple hedging strategy. Interpolation methods, grid construction techniques and parallel computation techniques are discussed to improve the performance of the numerical methods for valuing this option.
Cite this version of the work
Li Xiao (2006). Valuing Hedge Fund Fees. UWSpace. http://hdl.handle.net/10012/2931