2001/11/01 by Andrew W. Lo · 2 citations
Economics, Econometrics and Finance · #Financial Markets and Investment Strategies #Financial Risk and Volatility Modeling #Stochastic processes and financial applications
paper · doi:10.2469/faj.v57.n6.2490
openalex publication_date 2001/11/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/29
Although risk management has been a well-plowed field in financial modeling for more than two decades, traditional risk management tools such as mean–variance analysis, beta, and Value-at-Risk do not capture many of the risk exposures of hedge-fund investments. In this article, I review several unique aspects of risk management for hedge funds—survivorship bias, dynamic risk analytics, liquidity, and nonlinearities—and provide examples that illustrate their potential importance to hedge-fund managers and investors. I propose a research agenda for developing a new set of risk analytics specifically designed for hedge-fund investments, with the ultimate goal of creating risk transparency without compromising the proprietary nature of hedge-fund investment strategies.