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5、Which of the following statement best describes a long/short strategy?

A) Trading an equal dollar amount of long and short positions.

B) Buying the previous periods winners.

C) Buying the previous periods losers.

D) Long firm A’s stock, short firm A’s bonds.

wanganjie

 

The correct answer is A

Although many different forms of the long/short strategy exist, long/short involves trading an equal dollar amount of long and short positions.

wanganjie

 

6、Which of the following strategies would best be described as complex?

A) Contrarian strategy.

B) Long/short strategy.

C) Statistical Arbitrage.

D) A position in cash.

wanganjie

 

The correct answer is C

Statistical arbitrage is complex. The other strategies would be considered naive.

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AIM 3: Explain how the lack of transparency with respect to hedge funds necessitates other strategies for understanding and replicating historical hedge fund performance crises.

Which of the follow statements is (are) NOT correct regarding standardized risk management products and measures?

I.           Standardized risk factor models produce a market place more likely to have common exposures.

II.         Over the past 10 years managers have been using standardized products more frequently.

III.        The use of standardized risk products by hedge-fund managers has led to more overlap and similar portfolios.

A) I only.

B) None of these.

C) II only.

D) III only.

wanganjie

 

The correct answer is B

All of the statements are correct (i.e., none are incorrect).

wanganjie

 

AIM 4: Discuss how correlations between hedge fund strategies have evolved over time and the implications of those correlations today.

1、Which of the following statements is NOT an implication regarding the systemic risk in the hedge fund industry based on findings of a simulated study of long/short quantitative equity strategies?

A) The global financial system and hedge fund markets are more connected than market participants previously realized.

B) Hedge fund beta is now viewed as a reality.

C) Hedge funds are similar to banks with respect to the liquidity of their positions.

D) Hedge funds play significant roles in providing liquidity and credit to the market.

wanganjie

 

The correct answer is C

Hedge funds are becoming more like banks with respect to their role in providing liquidity and credit. However, unlike banks, hedge funds are able to quickly liquidate their positions.

wanganjie

 

2、One method for approximating a network view of the hedge-fund industry is to calculate the:

A) changes in absolute values of correlations between hedge-fund indices over time.

B) alphas of hedge fund indices over time compared to benchmark portfolios. 

C) compare the simulated returns of market-neutral and momentum strategies over time.

D) simulated returns for hedge funds over time using a boot-strap technique.

wanganjie

 

The correct answer is A

A network view of the hedge-fund industry can be approximated by calculating the changes in the absolute values of correlations between hedge-fund indices over time.