The hedge funds industry has evolved tremendously in recent years. According to the CASAM CISDM Industry Report, assets under management in hedge funds had grown from less than USD 50 billion at the end of 1990 to over USD 2.1 trillion at the end of 2007. However, assets managed by hedge funds...

This paper provides a risk framework for fiduciaries considering using a core-satellite approach to investing. While the article mainly covers the additional risk measurement techniques, which are needed when investing in hedge funds, its recommendations are also relevant for other investments...

We propose a new method to model hedge fund risk exposures using relatively high frequency conditioning variables. In a large sample of funds, we find substantial evidence that hedge fund risk exposures vary across and within months, and that capturing within-month variation is more important...

Hedge fund managers' risk-taking choices are determined by their compensation structure. Most existing studies focus on how the incentive fee and the high-water mark provision affect managers' risk-taking. We build a simple model to show that managers' risk-taking is negatively related to their...

The possibility to minimize volatility of the systematic risk while maximizing returns, is the use of an optimized buy long/sell short strategy that takes into account, that the market model is kinky. The equation of the market model – including a beta plus for increasing markets and a beta...

Loosely speaking, "systemic risk" refers to a financial system shock that is large enough to have severe negative consequences for the real economy. Following the financial crisis of 2008-2009, a large literature has emerged that attempts to quantify and measure systemic risk. In this paper we...

This paper analyses the systemic risk in an emerging market context, with two innovations. It uses the average of the percentile ranking of three widely used measures of systemic risk of a firm to calculate a single systemic risk index (SRI) for the firm. It then uses the SRI to identify...

During the last decade, derivatives markets became an asset class of their own and influenced the financial landscape strongly. While the financial sector contributes positively to overall growth in many studies up the mid nineties, a positive contribution of the financial sector to economic...

We propose an improved methodology for modelling potential scenario paths of banks' riskweighted assets, which drive the denominator of capital adequacy ratios. Our approach centres on modelling the internal risk structure of bank portfolios and thus aims to provide more accurate estimations...