Surprisingly enough, the financial crisis of 2008 has put a bright spotlight on hedge funds once again. In fact, Title IV of the Dodd-Frank act of 2010 places a host of additional regulations on hedge funds through modifications of the Investment Advisor Act of 1940. Yet, hedge funds had little...

The Black-Litterman model has gained popularity in applications in the area of quantitative equity portfolio management. Unfortunately, many recent applications of the Black-Litterman to novel aspects of quantitative portfolio management have neglected the rigor of the original Black-Litterman...

This chapter discusses the concepts related to using futures to hedge a variety of business risks. Those business risks include risks natural and unnatural hedgers might face in the market place. The chapter provides some simple examples of hedging in various markets to give the reader a sense...

The purpose of this study is to determine whether fund managers would do better in allocating their funds among different asset classes by using the new Generalized Autoregressive Conditional Heteroskedastic (GARCH) models. Recently, a spate of papers has been written claiming that GARCH models...

The speculative activities of hedge funds are a hot topic among market agents and authorities. In September 2006, the activities of Amaranth Advisors, a mid-sized Connecticut hedge fund sent menacing ripples through the natural gas market. By September 22, 2006, Amaranth had lost roughly $5.85B...

The recent collapse of the brilliant hedge fund, Long-Term Capital Management, has caused a lot of concern in the financial community. The quants are saddened by the limits of critical thinking and some of the non-quants are claiming that LTCM is just like the rest of them. This article...

The speculative activities of hedge funds are a hot topic among market agents and authorities. In September 2006, the activities of Amaranth Advisors, a large-sized Connecticut hedge fund sent menacing ripples through the natural gas market. By September 21, 2006, Amaranth had lost roughly...

Recent advances in online portfolio trading have brought investors much closer to achieving the frictionless paradigm often assumed in portfolio theory. However, taxes remain a significant barrier. We show that even a passive equity fund, like the Vanguard 500, has a significant drag on taxes,...

Investment managers often manage a portfolio of stocks with respect to a benchmark. Their primary concern is selecting the best stocks to outperform their benchmark, while constraining their tracking error. The most common way of doing this is to use an optimization framework to maximize the...