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Peter Gerdes's avatar

That's interesting but doesn't really apply here. The concern I raise is about someone who cares about the conditional value of the asset and whose reward is a step function based on that price (critically with no loss if his proposal fails).

However, I think I'm kinda nitpicking here. In particular, the problem I'm suggesting turns on the fact that the total value the asset pays out to investors on any degree of success will still be less than the total value of the fund so the potential raider of the fund can offer every investor a better payout than they expect to see for the find if the valuation conditional on the proposal failing accurately reflects the expected value of the measure.

I don't doubt that could be fixed either by changing the way the payout works or by simply barring the kind of self-dealing that would allow the fund to be raided.

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