Risk Management for Hedge Funds: Introduction and Overview
Year: 2001
Type: article
Abstract: Although risk management has been a well-plowed field in financial modeling for more than two decades, traditional risk management tools such as mean–variance analysis, beta, and Value-at-Risk do not capture many of the risk exposures of hedge-fund investments. In this article, I review several unique aspects of risk management for hedge funds—survivorship bias, dynamic risk analytics, liquidity, and nonlinearities—and provide examples that illustrate their potential importance to hedge-fund managers and investors. I propose a research agenda for developing a new set of risk analytics specifically designed for hedge-fund investments, with the ultimate goal of creating risk transparency without compromising the proprietary nature of hedge-fund investment strategies.
Source: Financial Analysts Journal
Author: Andrew W. Lo
Institution: Massachusetts Institute of Technology
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2741974588