Higher-moment risk exposures in hedge funds

Conference (2012, December)

Higher-Moment Risk Exposures in Hedge Funds

Conference (2012, April)

The paper singles out the key roles of US equity skewness and kurtosis in the determination of the market premia embedded in Hedge Fund returns. We propose a conditional higher-moment asset pricing model ... [more ▼]

The paper singles out the key roles of US equity skewness and kurtosis in the determination of the market premia embedded in Hedge Fund returns. We propose a conditional higher-moment asset pricing model with location, trading and higher-moment factors in order to describe the dynamics of the Equity Hedge (Market Neutral, Short Selling and Long/Short strategies), Event Driven, Relative Value, and Funds of Hedge Funds styles. The volatility, skewness and kurtosis implied in the US options markets are used by Hedge Fund managers as instruments to anticipate market movements. Managers should adjust their market exposure in response to variations in the implied higher moments. We show that higher-moment premia improve a conditional asset pricing model both in terms of explanatory power (R-squares and Schwarz criterion) and specification errors across all Hedge Fund styles. [less ▲]

Directional and Non-Directional Risk Exposures in Hedge Fund Returns

Conference (2011, May 13)

Strategic Analysis of Risk-Shifting Incentives with Convertible Debt

in Quarterly Journal of Finance (2011), 1(2), 293-321

Convertible debt eliminates asset substitution in a one-period setting (Green, 1984). But convertible debt terms are usually set before the asset substitution opportunity. This allows shareholders and ... [more ▼]

Convertible debt eliminates asset substitution in a one-period setting (Green, 1984). But convertible debt terms are usually set before the asset substitution opportunity. This allows shareholders and convertible debtholders to play a strategic noncooperative game. Two risk-shifting Nash equilibria are attainable: pure asset substitution when, despite no conversion, shareholders benefit from shifting risk, and strategic conversion when, despite early conversion, convertible debtholders expropriate wealth from straight debtholders. Even when initial convertible debt is designed to minimize the risk-shifting likelihood, the risk of asset substitution remains economically substantial — contrasting with the agency theoretic rationale for issuing convertible debt. [less ▲]

Directional and Nondirectional Risk Exposures in Hedge Fund Returns

Conference (2010, April)

Survival of commodity trading advisors: 1990-2003

in Journal of Futures Markets (2005), 25(8), 795-815

This article investigates the mortality of Commodity Trading Advisors (CTAs) over the 1990-2003 period, a longer horizon than any encompassed in the literature. A detailed survival analysis over the full ... [more ▼]

This article investigates the mortality of Commodity Trading Advisors (CTAs) over the 1990-2003 period, a longer horizon than any encompassed in the literature. A detailed survival analysis over the full range of CTA classifications is provided, and it is found that the median lifetime of CTAs in this sample is different than previously documented. Through the implementation of nonparametric, parametric, and semiparametric statistical techniques, it is emphasized that CTA survivorship is heavily contingent on the strategy followed by the fund. Furthermore, a significant positive size effect on survival is shown, whereas poor returns, and to a lesser extent, high-risk exposure, appear to hasten mortality. (c) 2005 Wiley Periodicals, Inc. [less ▲]

The performance of CTAs in changing market conditions

in Gregoriou, Greg; Karavas, V. N.; L'habitant, François-Serge (Eds.) et al Commodity Trading Advisors: Risk, Performance Analysis and Selection (2004)