Online Content

1. Getmansky, Mila, "Limits of Arbitrage: Understanding How Hedge Funds Fail"

Type:
Document
Date Created:
2005 July 17-2005 July 21
Collection:
System Dynamic Society Records
Collecting Area:
University Archives
Collection ID:
ua435
Parent Record(s):
23d738ba88f8333bc39725f9cb5bd0b8, 3c582e6f5cf305ef0030c7471b499022, and cc5bb0ac12a5b68b26b1583548898dae
Thumbnail Path Ss:
/downloads/0p096q95j?file=thumbnail
System Modified Dtsi:
2020-01-02T19:32:33Z
Description:
Even if arbitrage opportunities are found in a statistical sense, they might not be exploitable due to unexpected widening of spreads. This paper models such a case in the framework of a hedge fund. Specifically, Long Term Capital Management is presented as a case study. In particular, we calculate the likelihood of hedge fund failure and survival given different statistical arbitrage opportunities and hedge fund risk management decisions. Dynamic relationships between a hedge fund, dealer, and market (investor) are modeled.