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Hedge Fund Risk Premium Calculation by Wang Transform. International AFIR Colloquium 2003 YAMASHITA, Miwaka, CFA Tokio Marine Financial Solutions Ltd. Contents. Pricing the Hedge Fund Performance Derivatives The Idea for the Pricing Idea
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Hedge Fund Risk Premium Calculation by Wang Transform International AFIR Colloquium 2003 YAMASHITA, Miwaka, CFA Tokio Marine Financial Solutions Ltd.
Contents • Pricing the Hedge Fund Performance Derivatives • The Idea for the Pricing • Idea • Review of Wang Transform • Actual Examples • Fat Tail Issues • Extreme Value Indicator
= m + s C k Pricing the Hedge FundPerformance Derivatives • Risk Premium Calculation Principle : premium C m : average of losses s : standard deviation of losses : multiplier. k
Pricing the Hedge FundPerformance Derivatives • No Arbitrage Free Condition • No Equilibrium Pricing Method • No Clear Risk Measure
The Idea for the Pricing • Idea; Use Wang Transform
The Idea for the Pricing • Review of Wang Transform • Capital Market Line • Black-Scholes Option Pricing Model • Esscher Transform • Coherent Risk Measure • VaR, Tail VaR
The Idea for the Pricing • Other Discussion
Remarks • Risk Management and Risk Pricing • Loss Probability • No Risk Measure, No Equilibrium Pricing