During the last few years, there has been growing interest in the use of factor models for performing risk and exposure analysis of hedge funds.
Research Associate, EDHEC Business School- Head of Risk Management and Quantitative Research, Glenwood Capital Investments
While interpreting directional and spread related factors in this context is fairly straightforward, interpreting non-linear options exposures often is not. Given the variety of activities that can produce options exposures, the interpretation of multi-factor output in this regard can be more of an art than a science. This paper explores the variety of hedge fund manager activities that can drive options exposures in multi-factor analysis and the considerations that must be made in analyzing and interpreting these exposures.
|Research Cluster :||Finance|