Research and publications
The Benefits of Hedge Funds in Asset Liability Management
Bankers, Markets & Investors, N.97 - November - December 2008
This paper examines the benefits of including hedge funds for investors facing liability constraints. We cast th ...
Summary:
Bankers, Markets & Investors, N.97 - November - December 2008
This paper examines the benefits of including hedge funds for investors facing liability constraints. We cast the problem in a stochastic surplus optimisation set-up in which hedge funds are treated as a complement rather than an addition to traditional asset classes. This treatment makes it possible to alleviate the concern over ex-ante modelling of hedge fund returns, a notoriously difficult challenge that, given the short history and complexity and relative lack of transparency of these alternative investment styles, academic literature has not yet met. Our conclusion is that, when mixed with stocks and bonds, suitably designed portfolios of hedge funds can make for significantrisk management improvements in an ALM context. This impact is more pronounced when the relevant objective turns to extreme risks.
| Type : | Academic Publication |
|---|---|
| Date : | 01/11/2008 |
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