Hedge Fund Tail Risk: An Investigation in Stressed Markets, Extended Version with Appendix

39 Pages Posted: 22 Jan 2016 Last revised: 14 Nov 2016

See all articles by Monica Billio

Monica Billio

Ca Foscari University of Venice - Dipartimento di Economia

Lorenzo Frattarolo

Ca Foscari University of Venice - Dipartimento di Economia

Loriana Pelizzon

Goethe University Frankfurt - Faculty of Economics and Business Administration; Leibniz Institute for Financial Research SAFE; Ca Foscari University of Venice

Date Written: November 7, 2016

Abstract

This paper develops several risk measures that captures the tail risk of single hedge fund strategies and the tail risk contribution of these hedge fund strategies to the overall portfolio tail risk, conditional on the level of market distress. We show that, during the recent global financial crisis, all the different hedge fund strategies are contributing to the tail risk of the portfolio of hedge funds, mostly because of the hedge fund strategies' exposure to liquidity and credit risk.

Keywords: Hedge funds, Tail risk, Diversification, Marginal risk contribution

JEL Classification: G11, G29

Suggested Citation

Billio, Monica and Frattarolo, Lorenzo and Pelizzon, Loriana, Hedge Fund Tail Risk: An Investigation in Stressed Markets, Extended Version with Appendix (November 7, 2016). University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 01/WP/2016, Available at SSRN: https://ssrn.com/abstract=2719550 or http://dx.doi.org/10.2139/ssrn.2719550

Monica Billio (Contact Author)

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

HOME PAGE: http://www.unive.it/persone/billio

Lorenzo Frattarolo

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

Loriana Pelizzon

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, D-60323
Germany

Leibniz Institute for Financial Research SAFE ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

HOME PAGE: http://www.safe-frankfurt.de

Ca Foscari University of Venice ( email )

Dorsoduro 3246
Venice, Veneto 30123
Italy

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