期刊名称：Finance Publications / Centre for Financial Research, Cambridge University
出版年度：2004
卷号：2004
出版社：Cambridge University
摘要：In the first of two papers, we present a factor-decomposition based framework that facilitates
non-parametric risk analysis for complex hedge fund portfolios in the absence of portfolio level
transparency. Our approach has been designed specifically for use within the hedge funds-offunds
environment, but is equally relevant to those who seek to construct risk-managed
portfolios of hedge funds under less than perfect underlying portfolio transparency. Using
dynamic multivariate regression analysis coupled with a top-down qualitative understanding of
hedge fund return drivers, we are able to perform a robust factor decomposition to attribute risk
within any hedge fund portfolio with an identifiable strategy. Furthermore, through use of
Bayesian-adjusted correlated Monte Carlo simulation techniques, these factors can be employed
to generate implied risk profiles at either the constituent fund or aggregate funds-of-funds level.
As well as being pertinent to risk forecasting and monitoring, such methods also have
application to style analysis, profit attribution, portfolio stress testing and diversification
studies. In this first paper we present the technical foundations of such a framework. The
follow-up paper (Part II) will present detailed application of the concepts discussed in Part I to a
broad base of hedge fund strategies and funds-of-funds.
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