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Distortion risk measures for hedge funds

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  • Geman, Hélyette
  • Kharoubi-Rakotomalala, Cécile

Abstract

Catastrophic risk and insurance risk have required the use of specific risk measures for reinsurance companies to survive over the centuries. The goal in this paper is to apply the distortion risk measures introduced in actuarial sciences, as described by Wang (2000) in the Journal of Risk and Insurance, Vol. 67, No. 1, pp. 15–36, to the assessment of hedge funds risk. An empirical analysis of the Hedge Funds Research daily database over the period 2003–09 exhibits that these measures outperform the value-at-risk (VaR) or even extreme value-at-risk (EVaR) approaches in the capture of tail risks.

Suggested Citation

  • Geman, Hélyette & Kharoubi-Rakotomalala, Cécile, 2011. "Distortion risk measures for hedge funds," Journal of Risk Management in Financial Institutions, Henry Stewart Publications, vol. 4(3), pages 286-300, June.
    • Handle: RePEc:aza:rmfi00:y:2011:v:4:i:3:p:286-300
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    More about this item

    Keywords

    value-at-risk; distortion risk measure; hedge funds; tail risk; C16; D81; D84; G11;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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