Abstract
Form PF is the implementation of Congress’s post-crisis mandate for risk reporting by hedge funds to help protect investors and monitor systemic risk. The authors extend the methodology of Flood, Monin, and Bandyopadhyay to assess the risk measurement tolerances of Form PF for portfolios including options exposures. They generate a range of simulated portfolios of equities and equity options, wherein the weights are calibrated so that portfolios appear identical on Form PF. The authors assess the measurement tolerances of Form PF by examining the min–max range of actual risk exposures as measured directly from portfolio details. They find that the possible range of variation is significant. For portfolios that include options but do not report value-at-risk on Form PF, the range is especially large.
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