Annual incentive fee according to black-scholes formula

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A hedge fund with net asset value of $80 per share currently has a high water mark of $88. Suppose it is January 1, the standard deviation of the fund’s annual returns is 49%, and the risk-free rate is 5%. The fund has an incentive fee of 15%. What is the value of the annual incentive fee according to the Black-Scholes formula?

Reference no: EM13941632

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