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A Continuous-Time Version of a Delegated Asset Management Problem
- Source :
- Mathematical Problems in Engineering, Vol 2020 (2020)
- Publication Year :
- 2020
- Publisher :
- Hindawi Limited, 2020.
-
Abstract
- This paper develops a continuous-time model to study the widely used investment mandates in the institutional asset management industry. In this paper, just like He and Xiong (2013), we suppose that the asset management industry has a two-layered incentive structure, and fund families charging investors fixed management fees while compensating individual fund managers based on fund performance. Different from He and Xiong (2013), we suppose that the fund family aims to select an optimal incentive strategy to maximize its terminal benefits, while the fund manager needs to select the optimal effort level and the optimal investment portfolio to maximize his terminal net discounted compensation in a continuous-time model. By using dynamic programming principle and stochastic differential game theory, the optimal strategies and value functions of both sides are derived. At last, numerical studies are provided to illustrate the effects of all the parameters on the optimal strategies. The result reveals that the optimal incentive mechanism will redistribute both the benefit of the fund families and the cost of the fund managers’ effort.
- Subjects :
- Management fee
050208 finance
Article Subject
business.industry
General Mathematics
05 social sciences
General Engineering
Investment (macroeconomics)
Engineering (General). Civil engineering (General)
Investment management
Dynamic programming
Microeconomics
Incentive
0502 economics and business
Differential game
Value (economics)
QA1-939
Asset management
Business
050207 economics
TA1-2040
Mathematics
Subjects
Details
- Language :
- English
- ISSN :
- 15635147
- Volume :
- 2020
- Database :
- OpenAIRE
- Journal :
- Mathematical Problems in Engineering
- Accession number :
- edsair.doi.dedup.....089e3080b959a4c22952834cd5c269b2