This paper discusses Hedge funds' risks, in particular the leverage risk, as it has the greater effect when applied both to derivatives or other asset classes alike. Evaluation of the effect of leverage could become complicated as this effect could be escalated by the liquidity and credit risks...

We examine the impact of default risk on the market skewness risk effect that stocks with low market skewness risk outperform stocks with high risk documented in the previous literature. We find that the effect is strong among large, growth, and low default risk stocks, but vanishes among small,...