Managing hedge funds' operational risks

risk management

By their very nature, hedge funds allow investors to be exposed to different risk factors including volatility, counterparty, or liquidity risk, since this exposure is considered a source of superior returns for invested funds.

Market makers receive a premium (the spread) when acting as liquidity providers in a market. When hedge funds implement trading strategies that provide liquidity to a market, part of the return that can be expected is a premium for the liquidity risk they carry when h

To continue reading...