Hedge Funds
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Avg score: 56% • Most missed: “Specific nature of security - use of leverage - valuation method - manager skill”
Hedge Funds
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25 Questions

1. Credit spread

2. Definability - Commonality - Tradability

3. Carry Trade - Yeild Curve relative value trades - Purchasing Power Parity - Valuation models - option pricing models

4. Diversification - econ of scale - info adv - liquidity - manager access - lower negotiated fees - lower reg hurdle - currency hedging - pro management

5. Expected return of factor is negative - Benefit exceeds cost of positive return - Preexisting exposure - Risk factor is a by product of return and create great variation in return - Significant portion of variability can be explained by variation in

6. Tactical: skillful asset allocation based on changing market - Strategic: provide long term direction - Manager Selection: primary source - decide Which manager to use how much to allocation

7. Measures the convexity of the convertible-stock price relationship

8. Access bias: imposing strict selection criteria on track records - transparency - valuation - AUM

9. Measures the convexity of the convertible-stock price relationship

10. Transparent - verifiable - accountable - investible - reasonable - representative

11. Credit spread

12. Measures sensitivity to changes in currency value

13. Background - product info - performance - asset allocation - manager selection - portfolio construction - risk management - admin/op - client reporting - compliance/legal

14. Tactical: skillful asset allocation based on changing market - Strategic: provide long term direction - Manager Selection: primary source - decide Which manager to use how much to allocation

15. Access bias: imposing strict selection criteria on track records - transparency - valuation - AUM

16. Carry Trade - Yeild Curve relative value trades - Purchasing Power Parity - Valuation models - option pricing models

17. Double fee - performance fee - taxes - limited tranparency - lack of control

18. Changes in time

19. Factors have futures and forwards readily available thus easiest to hedge - a significant source of risk - great volatility in risk over time - common among investor portfolios - investor chose investment based on alpha thus removing beta should be o

20. Underlying stock dividend yield

21. Expected return of factor is negative - Benefit exceeds cost of positive return - Preexisting exposure - Risk factor is a by product of return and create great variation in return - Significant portion of variability can be explained by variation in

22. Diversification - econ of scale - info adv - liquidity - manager access - lower negotiated fees - lower reg hurdle - currency hedging - pro management

23. Recovery rate

24. Recovery rate

25. No transparency - - non-investible - lack of liquidity - difficult to replicate - report time lag

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