Alternative InvestmentsUNIVERSITÀ DELLA SVIZZERA ITALIANA
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- Mendrisio (Svizzera)
Cosa impari in questo corso?
Evaluation of students:
Finalgrade = 1/3 participation grade + 2/3 exam
The exam is 1h30min. It emphasizes both quantitative analysis and qualitative aspects of portfolio management covered in class.
Part 1: The hedge Fund Industry in Practice
Day 1: The demand for hedge funds
Morning: Tools for performance analysis
- Performance Analysis: what are allocators looking for?
- Absolute Returns, Alpha, Beta, VaR, Maximum drawdawn
- How to evaluate a track-record.
- Industry landscape: Different investment styles and sources of value creation
- Practice Exercises
Case on hedging: Pine Street Capital
- A critical look at the hedge fund industry:
- An industry in disarray?
- 3 Major Critiques
- Recap: How to critically evaluate a hedge fund?
Day 2: Implementing trading ideas
- "Micro-trade" Case: The Nikkei 225 Reconstitution
- Lecture: Role of various service providers: prime-broker, legal, administrator etc.
- An insider look at Quantitative strategies: some typical anomalies (behavioral finance)
Afternoon: Examples of "macro-trades":
- Case: A Tale of Two Hedge Funds: Magnetar and Peloton
- Conclusion: discussion on structured products, correlation risk, the subprime crisis
Part 2: Extreme risk and the "limits of arbitrage"
- to evaluate value creation in hedge funds, you need to understand market misvaluation.
- arbitrage is never risk free; worse, it contains exposure to extreme risk.
Day 1: Event-Driven strategies
We will first discuss two well known strategies related to corporate event.
Understanding value-creation and risk requires a clear understanding of corporate finance issues.
Lecture: capital structure refresher, distress investing.
Case: "H partners and Six Flags"
Lecture: M&A refrecher; risk arbitrage
Case: Farallon Partners
Day 2: When arbitrage can go wrong
We discuss here the classic arbitrage strategies and their extreme risk features. This is illustrated by the LTCM case, a case that every money manager must understand well.
Lecture: classical trades and their extreme risk features
Case: the collapse of LTCM, High tech arbitrage going wrong
Cochrane, J., Efficient Markets Today, University of Chicago, mimeo, Nov 2007.
Grinold, Richard C. and Ronald N. Kahn, Active Portfolio Management: A Quantitative Approach for Producing Superior Returns and Controlling Risk, McGraw-Hill; 2 edition, 1999.
Fung, W., and D. Hsieh, Hedge Fund Benchmarks: A Risk Based Approach, Financial Analyst Journal, 60 (2004), 65-80.
L'habitant, F-S., Hedge Funds: Quantitative Insights, Wiley, 2004.
Khandani, A., and A. Lo, What Happened to the Quants in August 2007?, MIT working paper, Nov 2007
Lo, Andrew W.,Risk Management for Hedge Funds: Introduction and Overview. Financial Analysts Journal, Vol. 57, No. 6, November/December 2001