Hedge fund performance and risk measurement continues to present intriguing challenges to both academics and practitioners. Risk-return measures that are solely based on historical return series tend to provide limited information and the marginal new information revealed by another quantitative...

This paper examines the effects of deviations from random walk in asset prices on option prices. Several approaches can be taken to model asset price processes as non-random walk processes. We choose to model the equity prices as fractional Brownian motions (FBM). Though FMB is not the most...

We examine the impact of the optionality of performance fee on the risk-shifting behavior of hedge fund managers. Since performance fees earned by hedge fund managers have the characteristics of a call option, the moneyness of the option may have an impact on the risk-taking behavior of...

Using daily returns on a set of hedge fund indices, we study (i) the properties of the indices' conditional density functions, (ii) the presence of asymmetries in conditional correlations between hedge fund indices and other investments and between hedge indices themselves, and (iii) the...

The growth in hedge fund has in part been due to their historical return to risk performance. Concern, however, has been expressed that one reason for the superior return to risk tradeoff for hedge funds, is that, unlike traditional mutual funds, hedge funds often trade in illiquid securities...

With a new proxy for the compensation option to hedge funds management, we explore the managerial incentives and risk-taking behavior for an extended sample of hedge funds. We focus on the incentives in response to the compensation option as discussed in Goetzmann, Ingersoll, and Ross (2003),...

This article uses bond market data to empirically test the asset pricing model of Kazemi (1992). According to this model the rate of return on a long-term, pure-discount, default-free bond will be perfectly correlated with changes in the marginal utility of the representative investor. The...

This paper examines the impact of sovereign credit rating change announcements on the CDS spreads of the event countries, and their spillover effects on other emerging economies' CDS premiums. In contrast to previous work, we find that positive events have a more consistent impact on sovereign...

This paper tests for contagion in emerging debt markets following Russia and Argentina's government defaults. Using techniques that have been previously suggested for contagion tests in stock markets we find that debt and stock markets respond differently to financial crises. Volatilities and...