Hedge fund seeding via fees-for-seed swaps under idiosyncratic risk

We develop a dynamic valuation model of the hedge fund seeding business by solving the consumption and portfolio-choice problem for a risk-averse manager who launches a hedge fund through a seeding vehicle. This vehicle, i.e. fees-for-seed swap, specifies that a strategic partner (seeder) provides a critical amount of capital in exchange for participation in the funds revenue. Our results indicate that the new swap not only solves the serious problem of widespread financing constraints for new and early-stage funds (ESFs) managers, but can be highly beneficial to both the manager and the seeder if structured properly

Detecting outlying subspaces for high-dimensional data: the new task, algorithms and performance

[Abstract]: In this paper, we identify a new task for studying the outlying degree (OD) of high-dimensional data, i.e. finding the subspaces (subsets of features) in which the given points are outliers, which are called their outlying subspaces. Since the state-of-the-art outlier detection techniques fail to handle this new problem, we propose a novel detection algorithm, called High-Dimension Outlying subspace Detection (HighDOD), to detect the outlying subspaces of high-dimensional data efficiently. The intuitive idea of HighDOD is that we measure the OD of the point using the sum of distances between this point and its k nearest neighbors. Two heuristic pruning strategies are proposed to realize fast pruning in the subspace search and an efficient dynamic subspace search method with a sample-based learning process has been implemented. Experimental results show that HighDOD is efficient and outperforms other searching alternatives such as the naive top–down, bottom–up and random search methods, and the existing outlier detection methods cannot fulfill this new task effectively