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Performance and Risk Measurement Challenges For Hedge Funds: Empirical Considerations

Peter Blum, Michel Dacorogna and Lars Jaeger
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Peter Blum: Converium
Lars Jaeger: Partners Group

Risk and Insurance from EconWPA

Abstract: Hedge funds are said to be rewarding investments because they have favourable risk-return characteristics on a standalone basis, and because they offer valuable diversification with respect to traditional stock and bond markets. On the other hand, hedge fund returns have a number of characteristics that make their quantitative analysis difficult: distributions are often asymmetric and have an increased tendency towards extreme outcomes ("heavy tails"), and dependence structures with respect to traditional markets are often complex. Moreover, quality and quantity of available data may be limited. In this study, we survey and present a number of quantitative analysis techniques that are able to cope with the particular characteristics of hedge funds, including methods for extreme value analysis and non- standard dependence models.

Keywords: hedge funds; risk measurement; risk management (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin and nep-rmg
Date: 2003-11-05
Note: Type of Document - Acrobat PDF; prepared on Win2000; to print on HP A4; pages: 20
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpri:0311001

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