This book will provide a cutting edge introduction to market risk management for Hedge Funds, Hedge Funds of Funds, and the numerous new indices and clones launching coming to market on a near daily basis. It will present the fundamentals of quantitative risk measures by analysing the range of Value-at-Risk (VaR) models used today, addressing the robustness of each model, and looking at new risk measures available to more effectively manage risk in a hedge fund portfolio. The book begins by analysing the current state of the hedge fund industry – at the ongoing institutionalisation of the market, and at its latest developments. It then moves on to examine the range of risks, risk controls, and risk management strategies currently employed by practitioners, and focuses on particular risks embedded in the more classic investment strategies such as Long/Short, Convertible Arbitrage, Fixed Income Arbitrage, Short selling and risk arbitrage. Addressed along side these are other risks common to hedge funds, including liquidity risk, leverage risk and counterparty risk. The book then moves on to examine more closely two models which provide the underpinning for market risk management in investment today – Style Value-at-Risk and Implicit Value-at-Risk. As well as full quantitative analysis and backtesting of each methodology, the authors go on to propose a new style model for style and implicit Var, complete with analysis, real life examples and backtesting. The authors then go on to discuss annualisation issues and risk return before moving on to propose a new model based on the authors own Best Choice Implicit VaR approach, incorporating quantitative analysis, market results and backtesting and also its potential for new hedge fund clone products. This book will be the only guide to VaR for Hedge Funds and will prove to be an invaluable resource as we embark into an era of increasing volatility and uncertainty.
Book Details:
- Author: Francois Duc
- ISBN: 9780470722992
- Year Published: 2008
- Pages: 262
- BISAC: BUS027000, BUSINESS & ECONOMICS/Finance
About the Book and Topic:
This book will provide a cutting edge introduction to market risk management for Hedge Funds, Hedge Funds of Funds, and the numerous new indices and clones launching coming to market on a near daily basis. It will present the fundamentals of quantitative risk measures by analysing the range of Value-at-Risk (VaR) models used today, addressing the robustness of each model, and looking at new risk measures available to more effectively manage risk in a hedge fund portfolio. The book begins by analysing the current state of the hedge fund industry – at the ongoing institutionalisation of the market, and at its latest developments. It then moves on to examine the range of risks, risk controls, and risk management strategies currently employed by practitioners, and focuses on particular risks embedded in the more classic investment strategies such as Long/Short, Convertible Arbitrage, Fixed Income Arbitrage, Short selling and risk arbitrage. Addressed along side these are other risks common to hedge funds, including liquidity risk, leverage risk and counterparty risk. The book then moves on to examine more closely two models which provide the underpinning for market risk management in investment today – Style Value-at-Risk and Implicit Value-at-Risk. As well as full quantitative analysis and backtesting of each methodology, the authors go on to propose a new style model for style and implicit Var, complete with analysis, real life examples and backtesting. The authors then go on to discuss annualisation issues and risk return before moving on to propose a new model based on the authors own Best Choice Implicit VaR approach, incorporating quantitative analysis, market results and backtesting and also its potential for new hedge fund clone products. This book will be the only guide to VaR for Hedge Funds and will prove to be an invaluable resource as we embark into an era of increasing volatility and uncertainty.
For a long time, market risk measurement and management in relation to hedge funds was considered of secondary importance. In 2007, with over 10,000 hedge funds available, identifying each manager by style or investment strategy alone is insufficient. As much as all portfolio managers practice good market risk measurement and management, so too must hedge fund managers apply this tool to their investment philosophy. The investors are watching, as having a specific style and denying the existence of a set of risk factors common to certain sub-sets of alternative strategy styles can no longer be justified. Moreover, nowadays all major institutional investors have significant exposure to hedge funds. The exception has become the rule and consolidation of market risk at the portfolio level – a standard practice for institutional investors – therefore requires the application of a simple and easily understandable synthetic risk indicator such as Value-At-Risk.
ONE OF A KIND – there is no book focusing exclusively on Value-At-Risk for hedge funds. TOPICAL – with the current instability of the financial markets and failure of a number of financial products, the risk analysis and management industry is booming and the topic high on the agenda of all investors and traders. MARKET SIZE – there are now well over 10,000 hedge funds available, with a far higher number of hedge fund investors, FOHF’s and emerging hedge fund clones. Because of the access costs, all Hedge Fund stakeholders will take a high interest in the activities and risk measures available to these funds.
About the Author
François Duc , PhD, is head of the Risk Advisory Desk for alternative investments at Union Bancaire Privée (UBP) , the largest investor in hedge funds on a global basis according to the June 2008 InvestHedge Ranking. In addition, he has written articles in finance, statistics and general equilibrium theory for various publications and is co-editor of a book on a learning process. Francois did his PhD in Econometrics at Geneva University where he was Assistant Professor in Statistics. Yann Schorderet, PhD, CFA, works as a quantitative strategist at Mirabaud & Cie Banquiers Privés. From 2004 to 2007, he was a quantitative hedge fund analyst at UBP (Union Bancaire Privée). Back in 2003, he acted as a quantitative analyst in a start-up company specialised in funds of hedge funds. Prior to that, he was Assistant Professor in the Department of Econometrics of the University of Geneva and the Laboratoire d’Economie Appliquée. From 2001 to 2002, he carried out postdoctoral research at the University of California, San Diego. He holds a PhD in econometrics and statistics from the University of Geneva. Yann is a CFA charterholder.