Hedge Fund Risk Assessment
Risk assessment and valuation of hedge funds are challenging tasks because of the unique hedge fund problems deriving from the lack of transparency, numerous biases and vague regulations. Most of conventional valuation frameworks used by traditional managers for ages become hardly applicable when it comes to hedge funds. Not surprisingly, investment vehicles built on such valuation techniques lead to a weak performance and unpredictable risks.
Hedge Fund Valuation Challenges
- Inapplicability of the mean-variance methodology because of the non-normal return distributions of hedge funds
- Inapplicability of the CAPM because of the non-convexity of the Efficient Frontier
- Low or even negative correlations with the corresponding indices
- Biases in hedge fund data
- Short return series
What We Can Do For You
- Valuation of all applicable risks: market, credit, concentration, liquidity, strategy, operational, legal and fraud risks
- Quantitative risk assessment across traditional and advanced metrics including VaR, MVaR, CVaR, tail risks, skewness and kurtosis, Hurst and many more
- Manager performance attribution and style analysis
- Manager style drift analysis
- Peer Group Analysis across various subsets of the hedge fund universe
- Dynamic analysis of risk-return profiles
- Best distribution fit and stochastic simulation of fund performance
