The Duality of Option Investment Strategies for Hedge Funds

This paper studies the structure of optimal investment strategies for a hedge fund manager, who is typically the general partner and thus a major investor in the fund, using stock index options in the hedge fund's portfolio in a discrete-time framework that overcomes some of the drawbacks of the continuous-time framework. It is able to model fat tails and does not require market completeness. This paper also studies models that address risk management of underperformance with respect to the benchmark, option investments, as well as liquidity and short selling restrictions.

Provided by: Humboldt University Berlin Topic: Date Added: Jul 2003 Format: PDF

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