wanganjie

 

2、An Equity Market Neutral style hedge fund is most likely to have a factor exposure to the market with which of the following values?

A) ?1.0.

B) 0.5.

C) 0.0.

D) 1.0.

wanganjie

 

The correct answer is C

The Equity Market Neutral strategy style funds’ coefficient on the S& 500 risk factor is expected to be close to zero.

wanganjie

 

2、Which of the following hedge fund styles has experienced high measures for the Sharpe ratio and serial correlation?

A) Convertible Arbitrage.

B) Long/Short Equity Hedge.

C) Dedicated Short Bias.

D) Managed Futures.

wanganjie

 

The correct answer is A

The Convertible Arbitrage funds have the highest relative performance using the Sharpe measure; however, funds with this style also have high positive serial correlation.

wanganjie

 

3、Based on historical relative performance measures for hedge fund strategies, which of the following funds are characterized as having low relative performance?

I.           Convertible Arbitrage.

II.         Dedicated Short Bias.

III.        Fixed Income Arbitrage.

IV.      Event Driven.

A) I only.

B) II only.

C) I and II.

D) I, III and IV.

wanganjie

 

The correct answer is B

The Dedicated Short Bias and the Managed Futures hedge fund styles have the lowest Sharpe ratios.

wanganjie

 

AIM 3: Analyze the sources of hedge fund return variance when the performance is assessed in a multifactor model.

1、Each source of return variance for a hedge fund should yield which of the following?

A) Risk factor.

B) Sharpe Ratio.

C) A linear clone.

D) Risk premium.

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4、Which of the following best describes the Capital Multiplication Partners strategy?

A) Writing out-of-the-money puts.

B) A covered call strategy.

C) A perfect market-timing strategy.

D) Selling insurance.

wanganjie

 

The correct answer is C

A perfect market-timing strategy is consistent with the CMP strategy. The CMP strategy is a protective put strategy that involves a long position, a put option on the underlying asset, and the underlying asset (S& 500), which is the same as buying insurance.

wanganjie

 

AIM 2: Compare the relative performance of various hedge fund strategies.

1、The Sharpe ratio for hedge funds is overstated:

A) if the standard deviation of the hedge fund is overstated.

B) during periods when the risk-free rate is low.

C) if the hedge fund is liquid.

D) if a hedge fund returns have high positive serial correlation.