This dissertation analyses ex-ante asymmetric performance fee structures used by South African Mutual Funds and estimates performance fees some time before the fees are paid. Certain parties might benefit from having a reasonable estimate of its value. We use spread option theory to value ex-ante performance fees. The data consist of monthly benchmark and fund gross returns from December 1999 to October 2014. The theoretical value of ex-ante performance fees is a function of spread volatility, therefore high spread volatilities give rise to high ex-ante performance fees. Ex-ante performance fee estimates are highly sensitive to the correlation between the fund and benchmark and a low positive correlation gives rise to a high ex-ante performance fee. The distribution of ex-ante performance fees is positively skewed because of the maximum function in the payoff. Ex-ante performance fee estimates obtained are lower than the actual performance fees paid.
Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:uct/oai:localhost:11427/27070 |
Date | January 2017 |
Creators | Dube, Tinashe Alison |
Contributors | Van Biljon, Andrew |
Publisher | University of Cape Town, Faculty of Commerce, Division of Actuarial Science |
Source Sets | South African National ETD Portal |
Language | English |
Detected Language | English |
Type | Master Thesis, Masters, MPhil |
Format | application/pdf |
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