Financial Markets and Portfolio Management

, Volume 20, Issue 4, pp 472–491 | Cite as

A fully parametric approach to return modelling and risk management of hedge funds

  • Stefan KassbergerEmail author
  • Rüdiger Kiesel


This paper examines the empirical properties of hedge fund returns and proposes a fully parametric model capable of adequately describing both univariate and multivariate return properties. The suggested model is based on the multivariate extension of the Normal Inverse Gaussian (NIG) distribution and will be shown to be capable of capturing the characteristic distributional features of hedge fund returns. Drawing on recent research in the area of Generalized Hyperbolic distributions and their calibration, we will elaborate on the application of the NIG-model for risk management purposes, and highlight the differences between the NIG and the Gaussian model.


Hedge funds NIG distribution Risk management 

JEL Classification

C16 C52 G32 


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Copyright information

© Swiss Society for Financial Market Research 2006

Authors and Affiliations

  1. 1.DFG Research Training Group 1100University of UlmUlmGermany
  2. 2.Department of Financial MathematicsUniversity of UlmUlmGermany

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