Although risk management has been a well-plowed field in financial modeling for more than two decades, traditional risk management tools such as mean–variance analysis, beta, and Value-at-Risk do not capture many of the risk exposures of hedge-fund investments. In this article, I review several unique aspects of risk management for hedge funds — survivorship bias, dynamic risk analytics, liquidity, and nonlinearities — and provide examples that illustrate their potential importance to hedge-fund managers and investors. I propose a research agenda for developing a new set of risk analytics specifically designed for hedge-fund investments, with the ultimate goal of creating risk transparency without compromising the proprietary nature of hedge-fund investment strategies.
![Bridge over ocean](/-/media/images/hero/rpc-theme-heros/bridge-default.jpg?w=2560&hash=C67CE44B69F875C23628FEF2E3F26808)