Gamma Trading Skills in Hedge Funds

This paper explores the gamma trading, timing and managerial skills of individual hedge funds across categories. We replicate the non-linear payoffs of hedge funds with traded options, with the opt ...

Auteur(s) :

Boris Fays

PhD candidate, HEC Liège

Georges Hübner, PhD

Professor of Finance, HEC Liège
Associate Professor, Maastricht University

Marie Lambert

Associate Professor of Finance, HEC Liège
Research Associate, EDHEC-Risk Institute

This paper explores the gamma trading, timing and managerial skills of individual hedge funds across categories. We replicate the non-linear payoffs of hedge funds with traded options, with the option features being endogenously defined in our replication model. On top of providing a flexible tool to create individual benchmarks for the payoff curvature of hedge fund, the model helps assigning hedge fund styles into three categories: directional with market timing skills, non-directional and market timers. Overall, our empirical results show that, on 30% of replicated funds in our sample (10,958 funds), there is no evidence of the presence of selection skills once fund performance is adjusted with respect to the option-based benchmark and the traditional option-based factors of Agarwal and Naik (2004). This research has an incremental potential to stimulate additional research in the field of hedge funds performance replication through passive strategies.

Type : Working paper
Date : le 02/05/2018
Pôle de recherche Finance

A voir également

Le Global MBA de l’EDHEC confirme sa place sur le podium de The Economist
Actualités
- 31-10-2019
The Economist conforte l’EDHEC à la 3ème place Française dans son classement annuel des...
OTHERWISE becomes EDHEC VOX !
Actualités
- 28-10-2019
 Avec EDHEC VOX, l’EDHEC réaffirme sa mission : transmettre des savoirs et alimenter le...
L’EDHEC Grande Ecole persiste et signe.  #Top 20 Mondial. #Classement Financial Times 2019
Actualités
- 28-10-2019
Ce classement confirme le leadership de l’EDHEC, qui maintient ce rang depuis plus de...
Recherche innovante : L’EDHEC conforte son leadership dans les infrastructures lors de la Paris Infraweek
Actualités
- 08-10-2019
EDHECinfra, le centre de recherche de l’EDHEC dédié aux infrastructures, participera...