ScienceDirect Publication: Finance Research Letters
Thu, 13 Feb 2020 18:01:39 GMT language
Publication date: Available online 12 February 2020
Source: Finance Research Letters
Author(s): Congming Mu, Jingzhou Yan, Zhian Liang
This paper studies the effects of jump risk in returns on the hedge fund manager’s optimal risk taking under high-water mark contract. The results show that the fund manager’s optimal risk taking under jump-diffusion risk is not a simple combination of that under pure-jump risk and pure-diffusion risk. The increase in jump intensity and jump size discourages the fund manager’s risk choice.