wanganjie

 

2、Which of the following best describes the impact of leverage on the linear clones that replicate hedge fund styles?

I.           Linear clones are not practical because the leverage values were too high to be practical.

II.         Linear clones can replicate the returns of hedge funds they represent by using futures contracts.

III.        The high amounts of leverage required to replicate the hedge fund returns makes the linear clones not practical.

A) I only.

B) III only.

C) II only.

D) I and III.

wanganjie

 

The correct answer is C

The impact of leverage is evaluated by using a renormalization factor. An analysis of the values for the renormalization factors indicates that leverage can be replicated using futures contracts. Therefore, the implied leverage in the clones is practical.

wanganjie

 

The correct answer is A

The results indicate that the Managed Futures and Global Macro linear clones out perform the actual fund for both the fixed-weight and rolling-window construction.

wanganjie

 

AIM 5: Distinguish between “fixed-weight” and “rolling-window clones,” explain their construction and compare the differences between these strategies.

1、Linear clones of hedge fund categories using a five-factor model:

A) have higher values for the first-order auto correlation than the hedge funds they replicate.

B) outperform the all hedge funds categories they attempt to replicate.

C) cannot be actively traded.

D) have more liquidity than the hedge funds they replicate.

wanganjie

 

The correct answer is D

All of the linear clones have low values for autocorrelations, confirming that the clones are more liquid.

wanganjie

 

The correct answer is A

Convertible Arbitrage style funds’ returns have three main factors:

1、   long credit spread.

2、   long bonds.

3、   long volatility.

Convertible Arbitrage funds, along with Managed Futures, have a large portion of their respective total returns contributed from the bond risk-factor, 34.9% and 53.8%, respectively.

wanganjie

 

8、Which of the following funds is most likely to have the highest leverage factor?

A) Managed Futures.

B) Fund of Funds.

C) Event Driven.

D) Convertible Arbitrage.

wanganjie

 

The correct answer is A

The highest renormalization factor is reported for the Managed Futures style at 2.76, and the lowest renormalization factor is 1.62 for the Fund of Funds style.

wanganjie

 

9、Linear clones perform best for which of the following hedge fund strategy categories?

A) Managed Futures.

B) Event Driven.

C) Emerging Markets.

D) Fixed Income Arbitrage.

wanganjie

 

The correct answer is A

The Convertible Arbitrage style managers on average have a negative contribution to expected return (?33.3%).