This paper first examines the effect of two basic types of investment performance fees, which differ in the method of performance measurement, on the amount and variability of investment advisory compensation. Then this effect is related to the risk borne by fund investors. From this analysis,...

We show how the value of a real option depends on corporate income taxes and the option's "debt capacity," defined as the amount of debt supported or displaced by the option. The value of the underlying asset must be an adjusted present value (APV). The risk-free rate of interest must be...