methodology to hedge funds. Finally the article will discuss a number of leading edge solutions to these problems. The risk … allocation framework consists of the following three steps. For the universe of potential investments: 1. Identify Risk Exposures …; 2. Optimize Risk Allocation; 3. Implement Investment Strategy. Part 1 of this series will discuss the first step in the …

In this paper, I review hedge fund risk using various commonly used measures including market betas, correlations, and … risk, especially in the early years, offering meaningful diverisification benefits to traditional stock/bond portfolios …

This study has 4 contributions to the literature. First, the authors analyze the risk characteristics for 11 Relative … data such as average drawdown, run up, and liquidity from each hedge fund category to assess the risk. Third, additional …

Hedge fund managers' risk-taking choices are determined by their compensation structure. Most existing studies focus on … how the incentive fee and the high-water mark provision affect managers' risk-taking. We build a simple model to show that … managers' risk-taking is negatively related to their future management fees. Using fund-level data, we calibrate the present …

This paper presents a simple dynamic investment strategy that allows long-term passive investors to hedge climate risk …

advanced econometric techniques.Recent research has also examined different risks hedge funds are exposed to and the risk … management practices of hedge funds. Particularly, studies have focused on systematic risk, liquidity risk, and financial … intermediary risk stemming from trading in the market and interacting with other market participants. With greater availability of …

adjusted to its risk. We summarize market liquidity by two major characteristics: a costly one because of the loss of … indicators are proposed to integrate, to a certain extent, market liquidity risk, especially for hedge funds investment … strategies according to their liquidity profile: do they want to capture illiquidity risk premium? Do they want to be free to …

We develop a new tail risk measure for hedge funds to examine the impact of tail risk on fund performance and to … identify the sources of tail risk. We find that tail risk affects the cross-sectional variation in fund returns, and … investments in both, tailsensitive stocks as well as options, drive tail risk. Moreover, managerial incentives and discretion as …

We develop a new systematic tail risk measure for equity-oriented hedge funds to examine the impact of tail risk on … fund performance and to identify the sources of tail risk. We find that tail risk affects the cross-sectional variation in … fund returns, and investments in both, tail-sensitive stocks as well as options, drive tail risk. Moreover, leverage and …

study how these endogenous effects influence traditional measures of risk-adjusted performance. We show that structural …