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Hedge Fund Risk Fundamentals: Solving the Risk Management and Transparency Challenge by Ramon Koss, Richard Horwitz

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CHAPTER 19

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I lied! In the Introduction, I promised that I would not use any Greek symbols. In this chapter, I do. To translate the above, the Greek letter sigma (Σ) is used by mathematicians to express the summation of a series. The series I am summing is Chapters 1 through 18 of this book.

The basics of risk management are actually quite simple. The objective is to understand the potential behavior of your investments. The key components of risk are:

  • Volatility
  • Diversification
  • Leverage
  • Liquidity

A basic knowledge of these fundamentals permits an investor (whether you are a fund manager managing a fund composed of securities or you are an ...

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