Advanced Risk and Performance Measures

Hedge funds tend to use investment tools with non-linear payoff and as such their return distribution are non Gaussian. For this reason traditional risk measures are inadequate, as indeed are risk adjusted performance measures such as Sharpe ratios that may be more easily manipulated. Moreover, traditional risk measures tend to be highly correlated with one another, and as such using a number of these measures does not provide additional insight into the riskiness of portfolios. This note studies alternative risk measures that tend to be less correlated with traditional risk measures and which are more appropriate for non-Gaussian distributions. 


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