Abstract
Previous studies have shown that systematic risk in hedge fund returns is partly captured by short positions in put option returns. This is suggestive of a potential ‘peso problem’ in hedge fund returns: a series of steady returns may alternate with an occasional crash. In this paper, we analyze whether equity option-exposures are actually there, and find they are not. Although some hedge fund indices show some exposure to put or call-returns, several robustness analysis as well as an analysis of individual hedge fund returns show that exposures are not consistent with fundamental characteristics of options, such as put-call parity and the positive relation between option prices and volatility.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
