RT Journal Article
SR Electronic
T1 Replicating the Properties of Hedge Fund Returns
JF The Journal of Alternative Investments
FD Institutional Investor Journals
SP 8
OP 39
DO 10.3905/jai.2008.712595
VO 11
IS 2
A1 Nicolas Papageorgiou
A1 Bruno Rémillard
A1 Alexandre Hocquard
YR 2008
UL https://pm-research.com/content/11/2/8.abstract
AB In this article, the authors implement a multivariate extension of the Dybvig [1988] Payoff Distribution Model that can be used to replicate not only the marginal distribution of most hedge fund returns but also their dependence on other asset classes. In addition to proposing ways to overcome the hedging and compatibility inconsistencies in Kat and Palaro [2005], the authors extend the results of Schweizer [1995] and adapt American option pricing techniques to evaluate the model and also derive an optimal dynamic trading (hedging) strategy. The proposed methodology can be used as a benchmark for evaluating fund performance, as well as to replicate hedge funds or generate synthetic funds.TOPICS: Portfolio theory, volatility measures, portfolio construction