Prior literature documents that the Sharpe ratio (SR) generates biases in performance evaluation if returns distribution deviates from normal because SR is derived under mean-variance model with strict assumption of either quadratic preferences or customarily distributed returns. When return distributions deviate normality, it may lead to unreasonable results. Therefore, this study examines whi...

In this paper, we propose a novel fuzzy logic controller, called linguistic hedge fuzzy logic controller, to simplify the membership function constructions and the rule developments. The design methodology of linguistic hedge fuzzy logic controller is a hybrid model based on the concepts of the linguistic hedges and the genetic algorithms. The linguistic hedge operators are used to adjust the s...

The incentive on an electricity generating firm to exercise market power depends strongly on the volume the firm has pre-sold in the forward or hedge markets. Therefore, in order to forecast the effect of mergers and other market developments on market power outcomes, it is essential to model the hedging decisions of dominant generating firms. This paper shows that a dominant firm’s profit-maxi...

This paper describes the approach to hedge detection we developed, in order to participate in the shared task at CoNLL 2010. A supervised learning approach is employed in our implementation. Hedge cue annotations in the training data are used as the seed to build a reliable hedge cue set. Maximum Entropy (MaxEnt) model is used as the learning technique to determine uncertainty. By making use of...

Hedge funds are in a better position than mutual funds in timing systematic risk factors because they are less regulated and thus have more freedom to use leverage and short sales. To examine whether factor timing is a source of hedge fund alpha, this paper decomposes excess return generated by hedge funds during 1994 – 2008 into security selection, factor timing, and risk premium using the new...

To estimate the premium an investor should expect from extended hedge fund lockups, Derman et al. (2009) proposed a three-state discrete-time Markov Chain to model the state of a hedge fund, allowing the state to change randomly among the states “good,” “sick” and “dead” every year. The lockup premium measures the consequence of being stuck with a sick fund. To be more realistic, we propose an ...

This paper proposes new dynamic conditional futures hedge ratios and compares their hedging performances along with those of common benchmark across three broad asset classes. Three the are based on upward-biased carry cost rate ratio, where each is augmented in a different bias-mitigating way. The ratio correlation between spot price changes generally: (1) provides highest effectiveness (2) ha...

Hedge funds have the most sophisticated risk management practices; however, hedge funds also appear to have a short lifetime relative to other managed funds. In this study, we investigate the failure probabilities of hedge funds—particularly the failures due to financial distress. We forecast the failure probabilities of hedge funds using both a proportional hazard model and a logistic model. B...