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RISK MEASUREMENT OF INVESTMENTS IN THE SATELLITE RING OF A CORE-SATELLITE PORTFOLIO: TRADITIONAL VERSUS ALTERNATIVE APPROACHES

HILARY TILL

Premia Risk Consultancy, Inc., Chicago, USA

Some of the ideas presented in this paper were drawn from articles previously published in Quantitative Finance; Risk & Reward; Derivatives Week; and GARP Risk Review (the Journal of the Global Association of Risk Professionals). A version of this article will appear in the forthcoming book, The Core-Satellite Approach to Portfolio Management, Geoff Hirt and J. Clay Singleton (eds.), McGraw-Hill (2004). For useful discussions and helpful comments, I am especially indebted to Joseph Eagleeye, co-founder of Premia Capital Management, LLC.

Address for Correspondence: Hilary Till, Premia Risk Consultancy, Inc., 505 N. Lake Shore Drive, Suite 402, Chicago, IL 60611, USA.

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https://doi.org/10.1142/S0217590804000822Cited by:3 (Source: Crossref)

Abstract

This paper provides a risk framework for fiduciaries by considering using a core-satellite approach to investing. While the article mainly covers the additional risk measurement techniques, which are needed when investing in hedge funds, its recommendations are also relevant for other investments that have default, devaluation, and/or liquidity risks associated with them. Also, while the article's focus is on quantitative techniques, we note that a fiduciary must also understand the economic basis for each investment's returns.

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