A fully parametric approach to return modelling and risk management of hedge funds |
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Authors: | Email author" target="_blank">Stefan?KassbergerEmail author Rüdiger?Kiesel |
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Institution: | (1) DFG Research Training Group 1100, University of Ulm, Helmholtzstr. 22, 89081 Ulm, Germany;(2) Department of Financial Mathematics, University of Ulm, Helmholtzstr. 18, 89081 Ulm, Germany |
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Abstract: | This paper examines the empirical properties of hedge fund returns and proposes a fully parametric model capable of adequately
describing both univariate and multivariate return properties. The suggested model is based on the multivariate extension
of the Normal Inverse Gaussian (NIG) distribution and will be shown to be capable of capturing the characteristic distributional
features of hedge fund returns. Drawing on recent research in the area of Generalized Hyperbolic distributions and their calibration,
we will elaborate on the application of the NIG-model for risk management purposes, and highlight the differences between
the NIG and the Gaussian model.
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Keywords: | Hedge funds NIG distribution Risk management |
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