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The high-water mark provision in hedge fund managers' compensation raises concerns of investors, because they are worried about that fund managers would take unnecessarily high risk in the fund investment. In this paper, we theoretically analyze the optimal strategies for hedge fund managers who choose to maximize the expected power utility from fees in both discrete-time and continuous- time models. The results show that when approaching the fee payment date, hedge fund managers would take as much risk as they are allowed to in the fund investment. However, if hedge fund managers are given more time, they tend to be more conservative. In the continuous-time model, the optimal allocation of the fund in the risky asset depends on market conditions, which are measured by the state price density.

Modeling ground-water hydrology is critical in low-gradient, high water table watersheds where ground-water is the dominant contribution to streamflow. The Hydrological Simulation Program-FORTRAN (HSPF) model has two different subroutines available to simulate ground water, the traditional ground-water (TGW) subroutine and the high water table (HWT) subroutine. The HWT subroutine has more parameters and requires more data but was created to enhance model performance in low-gradient, high water table watershed applications. The objective of this study was to compare the performance and uncertainty of the TGW and HWT subroutines when applying HSPF to a low-gradient watershed in the Coastal Plain of northeast North Carolina. One hundred thousand Monte Carlo simulations were performed to generate data needed for model performance comparison. The HWT model generated considerably higher Nash-Sutcliffe efficiency (NSE) values while performing slightly worse when simulating the 50% lowest and 10% highest flows. Model uncertainty was assessed using the Average Relative Interval Length (ARIL) metric. The HWT model operated with more average uncertainty throughout all flow regimes. Based on the results, the HWT subroutine is preferable when applying HSPF to a low-gradient watershed and the accuracy of simulated stream discharge is important. In situations where a balance between performance and uncertainty is called for, the choice of which subroutine to employ is less clear cut. / Master of Science

Essay One Under the principal-agent framework, we study and compare different compensation schemes commonly adopted by hedge fund and mutual fund managers. We find that the option-like performance fee structure prevalent among hedge funds is suboptimal to the symmetric performance fee structure. However, the use of high water mark (HWM) mitigates the suboptimality, though to a very limited extent. Bothour theoretical models and simulation results show that HWM will induce more managerial efforts only when a fund is slightly under the water but it will unfavorably dampen incentives when a fund is too deep under the water and when the manager's skill is poor. Allowing managers to invest personal wealth in their own funds, however, helps align interests and provides positive managerial incentives. Essay Two Existing literature has detected a "tournament behavior" among mutual fund managers that mid-year underperformers tend to take relatively higher risk than peers in the second half-year. We reexamine this issue and provide empirical evidence that such behavior does not exist among hedge fund managers, either at fund level or risk style level. Instead, hedge fund managers shift risk at mid-year in response to the moneyness of their incentive contracts. Also, risk shifting decisions are more driven by underperformance than by outperformance. HighWater Mark can strongly rein in excess risk-taking and therefore better aligns interests. Last, risk shifting on average does not improve either performance, moneyness of incentive contracts, or cash inflows. Essay Three We use factor models and optimal change point regression models to capture the intra-year risk dynamics of hedge fund managers. Those risk shifting managers are further divided into 'Informed', 'Uninformed' and 'Misinformed' groups, according to their post-shifting risk adjusted performance. We find evidence that supports the existence of an Adverse Selection' problem of managers compensation schemes. Namely, incentive contracts, designed to share risks and align interests, induce the strongest risk taking from the least informed or skilled hedge fund managers, whose risk-shifting decisions result in undesired or even deteriorated risk-adjusted returns for investors. We also find that the High Water Mark has only limited influence on mitigating excessive risk shifting.

Veränderte Randbedingungen erfordern modifizierte Betriebsregeln. Während die güteorientierte Bewirtschaftung von Stauräumen in der Vergangenheit hauptsächlich bei der langfristigen Bewirtschaftung eine Rolle spielte, gewinnt sie in jüngerer Zeit immer mehr auch bei der kurzfristigen Abflusssteuerung als Vorentlastung und während der Hochwasserereignisse an Bedeutung. Dabei soll vor allem die Entlastung aus Horizonten mit geringerer Wasserqualität ermöglicht werden. Gleichzeitig kann es notwendig werden, im Hochwasserfall insgesamt mehr vorzuentlasten und die Entnahmeeinrichtungen mit einzubeziehen. Der vorliegende Beitrag beschäftigt sich mit den diesbezüglichen Möglichkeiten bei Nutzung vorhandener Entnahmeeinrichtungen und den Anforderungen an bauliche Ergänzungen. Es werden Grundsätze für die Planung, die Berechnung, den Betrieb und die Überwachung sowie Beispiele aus hydraulischer Sicht besprochen.

Submitted by Gustavo Gazaneo (guslisandro@uol.com.br) on 2010-05-07T18:16:17Z No. of bitstreams: 1 Tese Gustavo Gazaneo Final.pdf: 287923 bytes, checksum: 6602f92108a7ad4f9cfd0ec68fec5dd3 (MD5) / Approved for entry into archive by Gisele Gammaro(gisele.gammaro@fgv.br) on 2010-05-14T19:13:32Z (GMT) No. of bitstreams: 1 Tese Gustavo Gazaneo Final.pdf: 287923 bytes, checksum: 6602f92108a7ad4f9cfd0ec68fec5dd3 (MD5) / Made available in DSpace on 2010-05-14T19:23:50Z (GMT). No. of bitstreams: 1 Tese Gustavo Gazaneo Final.pdf: 287923 bytes, checksum: 6602f92108a7ad4f9cfd0ec68fec5dd3 (MD5) Previous issue date: 2006-07-31 / Using the international literature on mutual funds, the present study search to find some characteristics that influence the performance of the equity mutual funds in Brazil from January of 1999 to April of 2005. The main subject of the work is to notice that the equity mutual funds have decreasing return of scale. At the same time, the persistence of a good profitability depends on the degree of the managers' professionalism and also of a good relationship between the responsible manager and the investor, and a great contract betw een both. It was observed, through a regression using panel data, that the volume doesn't have negative influence in the return of the funds, on the contrary, as larger is the fund, better is the profitabil ity of the same. It was also observed that the funds that pay performance incentive to their managers have a better acting than the others. It was identified also that the equity mutual funds that use high water marks as a remuneration incentive to the managers, has profitability than the funds that pay performance, but they don't use the high water marks in the own regulation. It was found that there is a straight relationship between incentive and performance. The results at this study may be used to facilitate the knowledge and the new decisions of researchers, investors, company managers, Brokers and Dealers, pension funds and others interested parties in the industry of investment funds in Brazil. / Tendo como base a literatura internacional sobre fundos mútuos, o presente estudo busca encontrar algumas características que influenciam a performance dos fundos de investimentos em ações no Brasil de janeiro de 1999 até abril de 2005. O objetivo principal do trabalho é perceber se os fundos de investimento em ações têm retorno decrescente de escala. Ao mesmo tempo, sabe-se que a persistência de uma boa rentabilidade depende do grau de profissionalismo dos gestores e também de uma boa relação entre o gestor responsável e o investidor e, um contrato ótimo entre ambos. Observou-se que o volume não tem influência negativa no retorno do fundo, pelo contrário, quanto maior o fundo melhor é a rentabilidade do mesmo. Os resultados também apresentaram que os fundos que cobram taxa de performance têm um desempenho melhor do que os que não cobram. Foi identificado também que os fundos que utilizam a marca d água como incentivo de remuneração aos gestores têm rentabilidade um pouco maior do que os fundos que pagam taxa de performance, mas não utilizam a marca d água no regulamento. Chegou-se a conclusão que há uma relação direta entre incentivo e desempenho. Os resultados aqui encontrados buscam facilitar o conhecimento e a tomada de decisão de pesquisadores, investidores, empresas gestoras, Corretoras e Distribuidoras, fundos de pensão e dos demais interessados na indústria de fundos de investimento em ações no Brasil.

Miami-Dade County implemented a series of water conservation programs, which included rebate/exchange incentives to encourage the use of high efficiency aerators (AR), showerheads (SH), toilets (HET) and clothes washers (HEW), to respond to the environmental sustainability issue in urban areas. This study first used panel data analysis of water consumption to evaluate the performance and actual water savings of individual programs. Integrated water demand model has also been developed for incorporating property’s physical characteristics into the water consumption profiles. Life cycle assessment (with emphasis on end-use stage in water system) of water intense appliances was conducted to determine the environmental impacts brought by each practice. Approximately 6 to 10 % of water has been saved in the first and second year of implementation of high efficiency appliances, and with continuing savings in the third and fourth years. Water savings (gallons per household per day) for water efficiency appliances were observed at 28 (11.1%) for SH, 34.7 (13.3%) for HET, and 39.7 (14.5%) for HEW. Furthermore, the estimated contributions of high efficiency appliances for reducing water demand in the integrated water demand model were between 5 and 19% (highest in the AR program). Results indicated that adoption of more than one type of water efficiency appliance could significantly reduce residential water demand. For the sustainable water management strategies, the appropriate water conservation rate was projected to be 1 to 2 million gallons per day (MGD) through 2030. With 2 MGD of water savings, the estimated per capita water use (GPCD) could be reduced from approximately 140 to 122 GPCD. Additional efforts are needed to reduce the water demand to US EPA’s “Water Sense” conservation levels of 70 GPCD by 2030. Life cycle assessment results showed that environmental impacts (water and energy demands and greenhouse gas emissions) from end-use and demand phases are most significant within the water system, particularly due to water heating (73% for clothes washer and 93% for showerhead). Estimations of optimal lifespan for appliances (8 to 21 years) implied that earlier replacement with efficiency models is encouraged in order to minimize the environmental impacts brought by current practice.

Veränderte Randbedingungen erfordern modifizierte Betriebsregeln. Während die güteorientierte Bewirtschaftung von Stauräumen in der Vergangenheit hauptsächlich bei der langfristigen Bewirtschaftung eine Rolle spielte, gewinnt sie in jüngerer Zeit immer mehr auch bei der kurzfristigen Abflusssteuerung als Vorentlastung und während der Hochwasserereignisse an Bedeutung. Dabei soll vor allem die Entlastung aus Horizonten mit geringerer Wasserqualität ermöglicht werden. Gleichzeitig kann es notwendig werden, im Hochwasserfall insgesamt mehr vorzuentlasten und die Entnahmeeinrichtungen mit einzubeziehen. Der vorliegende Beitrag beschäftigt sich mit den diesbezüglichen Möglichkeiten bei Nutzung vorhandener Entnahmeeinrichtungen und den Anforderungen an bauliche Ergänzungen. Es werden Grundsätze für die Planung, die Berechnung, den Betrieb und die Überwachung sowie Beispiele aus hydraulischer Sicht besprochen.

Abstract Purpose – The purpose of this thesis is to give the investors a better understanding on how to interpret the costs of funds with performance fee with high-water mark and give some guidelines when comparing funds with different fee structures, i.e. mutual funds and hedge funds. Mathematical approaches – Two mathematical approaches are used in the study. The first approach is to describe the high-water mark contract as a partial differential equation, which has the characteristics of Black-Scholes equation. The second approach is to numerically simulate the evolution of a fund’s value. During the development of the fund’s value the cost of the fees are calculated and discounted. Findings – It is found that the expected cost of the performance fee with high-water mark, vary a lot. An example is when the volatility increases the expected cost of performance fee drastically raises while the management fee is unchanged. Another interesting finding is that the order of when the fees’ are charged affects the expected cost of the performance fee. Conclusion – The guidelines for the investor is to invest in a fund with a performance fee in low volatile markets and a fund with just the management fee in high volatile markets. Another impact is the time step which the high-water mark level is controlled. The investor wants these controls as infrequently as possible. If the controls are done at a daily basis the expected cost of the performance fee is higher than in a monthly control. It is also concluded that the Normanbelopp of a fund with a performance fee should not be trusted. Key-words:

Full protection from forces of nature can not be achieved. A residual risk will always remain. Compromises must be found between the expectations and demands on flood protection on the one hand and the technical, economical and ecological possibilities on the other. The calls for full flood protection by victims of the Weißeritz flood in 2002 and by some politicians can not be satisfied. However, the valid design criterias concerning the upgrading of the Weißeritz regarding flood protection do not meet the requirements. A more sophisticated approach by the Saxonian Dam Authority and the City of Dresden led to much greater design discharge values. Therefore the Institute for Hydraulic Engineering and Applied Hydromechanics of TU Dresden developed physical and numerical models which will function as assisting tools during the decision process for the planned flood measures. / Der Schutz vor Naturgewalten ist kein vollständiger Schutz, ein Restrisiko bleibt immer. Hier sind Kompromisse erforderlich, Kompromisse zwischen den Erwartungen und Forderungen an den Hochwasserschutz und den technischen, ökonomischen und ökologischen Möglichkeiten. Die Forderungen vom Hochwasser betroffener Bürger sowie einiger Dresdner Politiker, sich vollständig vor Hochwasser an der Weißeritz zu schützen, sind nicht realisierbar. Andererseits sind Bemessungsgrößen nach derzeit geltenden Regeln für den Ausbau der Weißeritz nicht zeitgemäß. Eine differenziertere Betrachtungsweise für Dresden führte in den Verhandlungen zwischen der sächsischen Landestalsperrenverwaltung und der Stadt zu einem weit höheren Bemessungsabfluss. Die Hochwassermodelle am Institut für Wasserbau und Technische Hydromechanik der TU Dresden haben diesen Prozess unterstützt.