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The Duality of Option Investment Strategies for Hedge Funds

Rodriguez-Mancilla, Jose R.; Ziemba, William T. - Institut für Schweizerisches Bankwesen <Zürich>; … - 2003

This paper explores the structure of optimal investment strategies using stochastic programming and duality theory in investment portfolios containing options for a hedge fund manager who attempts to beat a benchmark. Explicit optimal conditions for option investments are obtained for several...

Persistent link: https://www.econbiz.de/10005858399

Incentives and Risk Taking in Hedge Funds

Kouwenberg, Roy; Ziemba, William T. - Institut für Schweizerisches Bankwesen <Zürich>; … - 2004

This paper presents a theoretical study of how incentives affect hedge fund risk and returns and an empirical study of the performance of a large group of operating hedge funds. Most hedge fund managers receive a flat fee plus a share of the returns above a certain benchmark. We investigate how...

Persistent link: https://www.econbiz.de/10005858410

Performance in the Hedge Fund Industry : An Analysis of Short and Long-Term Persistence

Bares, Pierre-Antoine; Gibson, Rajna; Gyger, Sebastien - Institut für Schweizerisches Bankwesen <Zürich>; … - 2002

In this study we analyze the performance persistence of hedge funds over different time horizons. Using a non-parametric test, we first observe that the relative value and the specialist credit strategies contain the highest proportion of outperforming mangers. Furthermore, there is no evidence...

Persistent link: https://www.econbiz.de/10005859107

Hedge Funds Allocation with Survival Uncertainty and Investment Constraints

Barès, Pierre-Antoine; Gibson, Rajna; Gyger, Sébastien - Institut für Schweizerisches Bankwesen <Zürich>; … - 2002

We use an expected utility framework to integrate the hedge funds survival uncertainty into an asset allocation optimizartion model. The addition of investment constraints complicates the resolution of the optimal allocation problem. It is solved using a genetic algorithm that mimics the...

Persistent link: https://www.econbiz.de/10005859356

Risk Management for Derivatives in Illiquid Markets : A Simulation-Study

Frey, Rüdiger; Patie, Pierre - Institut für Schweizerisches Bankwesen <Zürich>; … - 2002

In this paper we study the hedging of derivatives in illiquid markets. More specifically we consider a model where the … implementation of a hedging strategy affects the price of the underlying security. Following earlier work we characterize perfect … hedging strategies by a nonlinear version of the Black-Scholes PDE. The core of the paper consists of a simulation study. We …

Persistent link: https://www.econbiz.de/10005859384

Weak Convergence of Hedging Strategies of Contingent Claims

Prigent, Jean-Luc; Scaillet, Olivier - Institut für Schweizerisches Bankwesen <Zürich>; … - 2002

This paper presents results on the convergence for hedging strategies in the setting of incomplete financial markets … trading strategy, when perfect hedging of contingent claims is infeasible, is robust under weak convergence. Several …

Persistent link: https://www.econbiz.de/10005859330

Robust Mean-Variance Portfolio Selection

Perret-Gentil, Cédric; Victoria-Freser, Maria-Pia - Institut für Schweizerisches Bankwesen <Zürich>; … - 2004

This paper investigates model risk issues in the context of mean-variance portfolio selection. We analytically and numerically show that, under model misspeciﬁcation, the use of statistically robust estimates instead of the widely used classical sample mean and covariance is highly beneﬁcial...

Persistent link: https://www.econbiz.de/10005858020

Evolutionary Portfolio Selection with Liquidity Shocks

De Giorgi, Enrico - Institut für Schweizerisches Bankwesen <Zürich>; … - 2004

The wealth dynamics of insurance companies strongly depends on the success of their investment strategies, but also on liquidity shocks which occur during unfavorable years, when indemnities to be paid to the clients exceed collected premia. An investment strategy that does not take liquidity...

Persistent link: https://www.econbiz.de/10005858142

Ratchet vs Blase Investors and Asset Markets

St-Amour, Pascal - Institut für Schweizerisches Bankwesen <Zürich>; … - 2004

This paper proposes a new wealth-dependent utility function for the inter-temporal consumption and portfolio problem, in which the subsistance (bliss) con-sumption level is a function of wealth. Ratchet effects obtain when higher wealth in-creases the subsistance consumption level; blas´...

Persistent link: https://www.econbiz.de/10005858307

Survival of the Fittest on Wall Street

Hens, Thorsten; SchenkHoppe, Klaus Reiner - Institut für Schweizerisches Bankwesen <Zürich>; … - 2004

This paper studies an application of a Darwinian theory of portfolioselection to stocks listed in the Dow Jones Industrial Average (DJIA).We analyze numerically the long-run outcome of the competition ofﬁx-mix portfolio rules in a stock market with actual DJIA dividends.In the model seemingly...

Persistent link: https://www.econbiz.de/10005858308