Tailoring risk modelling for hedge fund investors
How do hedge funds model risk and how should it be modelled from the perspective of the fund's manager or investors in a fund, asks Axioma
Modelling the inherent risk of a hedge fund investment has been a widely debated topic in the financial community over the past decade. There are both practical and theoretical obstacles to porting the tools and techniques used in the analysis of more traditional investment vehicles such as mutual funds. Traditional investments are typically benchmarked against an index and are comprised of vanilla positions such as stocks and bonds. On the other hand, hedge funds are focused on absolute returns
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