Exam 26: Hedge Funds

Assume that you manage a $2 million portfolio that pays no dividends and has a beta of 1.25 and an alpha of 2% per month.Also, assume that the risk-free rate is 0.05% (per month) and the S&P 500 is at 1,300.If you expect the market to fall within the next 30 days, you can hedge your portfolio by ______ S&P 500 futures contracts (the futures contract has a multiplier of $250).

Pairs trading is associated with

______ must periodically provide the public with information on portfolio composition.

______ are subject to the Securities Act of 1933 and the Investment Company Act of 1940 to protect unsophisticated investors.

Assume that you manage a $2 million portfolio that pays no dividends and has a beta of 1.3 and an alpha of 2% per month.Also, assume that the risk-free rate is 0.05% (per month) and the S&P 500 is at 1,500.If you expect the market to fall within the next 30 days, you can hedge your portfolio by ______ S&P 500 futures contracts (the futures contract has a multiplier of $250).

Assume that you manage a $1.3 million portfolio that pays no dividends and has a beta of 1.45 and an alpha of 1.5% per month.Also, assume that the risk-free rate is 0.025% (per month) and the S&P 500 is at 1,220.If you expect the market to fall within the next 30 days, you can hedge your portfolio by ______ S&P 500 futures contracts (the futures contract has a multiplier of $250).

Statistical arbitrage is a version of a ______ strategy.

An example of a ______ strategy is the mispricing of a futures contract that must be corrected by contract expiration.

Hedge funds often employ ______ that require investors to provide ________ notice of their desire to redeem funds.

______ bias arises because hedge funds only report returns to database publishers if they want to.

A bet on particular mispricing across two or more securities with extraneous sources of risk, such as general market exposure hedged away, is a

A ________ is an investment fraud in which a manager collects funds from clients, claims to invest those funds on their behalf, and reports extremely favorable investment returns, but in fact uses the funds for his or her own use.

Hedge fund incentive fees are essentially

A hedge fund pursuing a ______ strategy is attempting to exploit temporary misalignments in relative pricing.

The risk profile of hedge funds ______, making performance evaluation ______.

If the yield on mortgage-backed securities was abnormally low compared to Treasury bonds, a hedge fund pursuing a relative value strategy would

Hedge funds traditionally have ______ than 100 investors and ______ to the general public.

Market neutral bets can result in ______ volatility because hedge funds use ______.

Unlike mutual funds, hedge funds

________ refers to sorting through huge amounts of historical data to uncover systematic patterns in returns that can be exploited by traders.