Market Risk Management for Hedge Funds / Wiley Finance Series (PDF)

Contents Acknowledgements 1 Introduction Part I Fundamentals for Style and Implicit Values-at-Risk 2 Ongoing Institutionalization 2.1 Hedge funds industry size and asset flows 2.2 Style distribution 2.3 2006-2007 structural developments 2.4 Are hedge funds becoming decent? 2.5 Funds of hedge funds persistence 3 Heterogeneity of Hedge Funds 3.1 Testing sample 3.2 Smoothing effect of a restrictive classification 3.3 Heterogeneity revealed through Modern Cluster Analysis 3.4 Appendix A: Indices sample 4 Active and Passive Hedge Fund Indices 4.1 Illusions fostered by active hedge fund indices 4.2 Passive indices and the illusion of being clones 4.3 Conclusion 5 The Four Dimensions of Risk Management for Hedge Funds 5.1 Operational and structural risk 5.2 Risk control 5.3 Delegation risk 5.4 Direct investment risk 5.5 Conclusion 5.6 Appendix B: Risks embedded with some classical alternative strategies 5.7 Appendix C: Other common risks to hedge funds Part II Style Value-at-Risk 6 The Original Style VaR Revisited 77 6.1 The Multi-Index Model 6.2 The Style Value-at-Risk 6.3 Backtesting revisited 7 The New Style Model 7.1 Extreme Value Theory 7.2 Risk consolidation 7.3 The New Style Model 7.4 Appendix D: Algorithms for the elemental percentile method 7.5 Appendix E: Copulas 8 Annualization Problem 8.1 Annualization of the main statistical indicators assuming i.i.d. 8.2 Annualization of Value-at-Risk assuming i.i.d. 8.3 Annualization without assuming i.i.d. 8.4 Applications to the Style Value-at-Risk 8.5 Appendix F: annualization of excess kurtosis 8.6 Appendix G: Drost and Nijman Theorem Part III Implicit Value-at-Risk 9 The Best Choice Implicit Value-at-Risk 9.1 Alternative style analysis and BCI Model 9.2 Theoretical framework of BCIM 9.3 Best Choice Implicit VaR 9.4 Empirical Tests 10 BCI Model and Hedge Fund Clones 10.1 Ten-Factor Model 10.2 Non-Linear Model 11 Risk Budgeting 11.1 Value-at-Risk of a multi-managers portfolio 11.2 Risk decomposition: 'before and after'

François Duc is head of the Risk Advisory Desk for
alternative investments of UBP (Union Bancaire Privée), the
second largest worldwide investor in hedge funds. Prior to joining
UBP in October 2005, Francois was responsible for the quantitative
analysis and risk management at Banque SYZ & Co. 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 works as a quantitative strategist at
Banque Mirabaud & Cie. From June 2004 to June 2006, he was a
member of both the Risk Advisory team and the Quantitative Team at
UBP (Union Bancaire Privée). 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 post-doctoral 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.

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