We propose a new class of performance measures for Hedge Fund (HF) returns based on a family of empirically identifiable stochastic discount factors (SDFs). The SDF-based measures incorporate no-arbitrage pricing restrictions and naturally embed information about higher-order mixed moments...

Option pricing models are tools for pricing and hedging derivatives. Good models are complex and the econometrician faces many design decisions when bringing them to the data. I show that strategically constructed low-dimensional filter designs outperform those that try to use all the available...