An SDF approach to hedge funds' tail riskevidence from Brazilian funds

Resumo

The main purpose of this paper is to propose a methodology to obtain a hedge fund tail risk measure. Our measure builds on the methodologies proposed by \citet*{ag15} and \citet*{aagvg15}, which rely in solving dual minimization problems of Cressie Read discrepancy functions in spaces of probability measures. Due to the recently documented robustness of the Hellinger estimator (Kitamura et al., 2013), we adopt within the Cressie Read family, this specific discrepancy as loss function. From this choice, we derive a minimum Hellinger risk-neutral measure that correctly prices an observed panel of hedge fund returns. The estimated risk-neutral measure is used to construct our tail risk measure by pricing synthetic out-of-the-money put options on hedge fund returns of ten specific categories. We provide a detailed description of our methodology, extract a Tail risk hedge fund factor for Brazilian funds, and relate it to a commonly adopted market volatility measure.

Ficha do documento

Tipo

Artigo científico

Ano

2017

Instituição

Sociedade Brasileira de Econometria

Fonte

Repositório da FGV

Idioma

Inglês

Acesso

Acesso aberto

DOI

10.12660/bre.v37n12017.62104

Identificador

oai:repositorio.fgv.br:10438/26222

Temas

Economia

Palavras-chave

Asset pricingStochastic discount factorRisk-neutral probabilityTail riskHedge fundsEconomiaFundos hedgeAvaliação de ativos - Modelo (CAPM)Títulos (Finanças)Processo estocásticoRisco (Economia)