Do Hedge Funds Have Enough Capital? A Value-at-Risk Approach

Topics:
Insurance,
Investment and Capital Markets
Tags:
Finance,
Financial Services,
Hedge Fund,
Investment,
Tsinghua University
Source:
Tsinghua University

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Overview: This paper examines the risk characteristics and capital adequacy of hedge funds using Value-at-Risk (based on Extreme Value Theory) as the criterion for measuring risk and estimating capital requirements. Using extensive data on nearly thirteen hundred live and dead hedge funds, this paper finds that the vast majority of funds are adequately capitalized. In addition, a large fraction of hedge funds maintain risk profiles comparable to that of an equivalent investment in a broad equity market index (like the S&P 500).

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Format: PDF | Size: 1,690KB | Date: Nov 2002 | Pages: 45

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