Hedge Funds in a Risk Allocation Framework: Part 2
14 Pages Posted: 7 May 2015 Last revised: 23 Jul 2015
Date Written: August 1, 2002
Part 1 of this paper can be found at http://ssrn.com/abstract=2602785.
This article is the second in a two-part series. The goal of this series is to discuss the innovative ways in which academics and practitioners are enhancing the risk allocation framework in order to incorporate hedge funds. The risk allocation framework consists of the following three steps. For the universe of potential investments: 1. Identify Risk Exposures; 2. Optimize Risk Allocation; 3. Implement Investment Strategy.
Part 1 of this series discussed how to apply the first step, identifying risk exposures. Part 2 covers the second and third steps, optimizing the risk allocation and implementing the investment strategy.
Keywords: hedge funds, risk allocation, VAR
JEL Classification: G11, G23
Suggested Citation: Suggested Citation