Hedge Fund Managers Receive Incentive Bonuses When They Increase Portfolio

question 31

Multiple Choice

Hedge fund managers receive incentive bonuses when they increase portfolio assets beyond a stipulated benchmark but lose nothing when they fail to perform. This is equivalent to ________.

• A) writing a call option
• B) receiving a free call option
• C) writing a put option
• D) receiving a free put option

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Definitions:

Proliferation

The rapid increase or spread of something, often used in the context of weapons, technology, or diseases.

Ballparks

Stadiums or fields where baseball games are played, often referred to more generally as venues for sporting or large-scale events.

Morality

Principles concerning the distinction between right and wrong or good and bad behavior.

Deontology

An ethical theory that suggests actions are morally right or wrong based on a set of rules, rather than the consequences of the actions.