Co-authored by two respected authorities on hedge funds and asset management, this implementation-oriented guide shows you how to employ a range of the most commonly used analysis tools and techniques both in industry and academia, for understanding, identifying and managing risk as well as for quantifying return factors across several key investment strategies. The book is also suitable for use as a core textbook for specialised graduate level courses in hedge funds and alternative investments.

The book provides hands-on coverage of the visual and theoretical methods for measuring and modelling hedge fund performance with an emphasis on risk-adjusted performance metrics and techniques. A range of sophisticated risk analysis models and risk management strategies are also described in detail. Throughout, coverage is supplemented with helpful skill building exercises and worked examples in Excel and VBA.

The book’s dedicated website, provides Excel spreadsheets and VBA source code which can be freely downloaded and also features links to other relevant and useful resources.

A comprehensive course in hedge fund modelling and analysis, this book arms you with the knowledge and tools required to effectively manage your risks and to optimise the return profile of your investment style.

“Most institutional investors have diversified allocations that span a variety of asset classes, but some level of implicit equity exposure lurks in virtually every asset. This book is an essential read for those who wish to understand the modern world of hedge fund investing.”
— Dr Momtchil Pojarliev, Director and Senior Portfolio Manager, Hathersage Capital Management LLC

“Hedge fund modelling and analysis by Darbyshire and Hampton is a comprehensive and highly-readable guide to the world of hedge funds. The book covers not just the questions of fund structure and organisation, but also the important questions of performance measurement and analysis. It also covers the quantification of risk and provides the Excel/VBA tools needed to do this. It is the book to read if you want to run or analyse a hedge fund.”
—Dr. Dominic O’Kane, Affiliated Professor of Finance, EDHEC Business School

“This book provides a valuable new perspective on hedge funds. It treats them both as investment vehicles as well as an asset class. This dual viewpoint allows the reader to understand both the operational aspects of hedge funds as well as how to model the major hedge fund indices. The modeling framework is clearly outlined and shows the reader how to construct portfolios of these indices. It will be of interest to anyone investing or interested in investing in hedge funds.”
—Dr Devraj Basu, Associate Professor of Finance, SKEMA Business School

Having been popularised by George Soros in the 1990s, hedge funds have grown from occupying an obscure niche of the financial markets to become a major player in the asset management industry, with an estimated $1 trillion (USD) of assets under management. With the global financial meltdown of 2008 behind us and another potentially worse crisis looming on the horizon, the challenges have never been greater for hedge fund managers seeking to deliver the kinds of returns their clients have come to expect. To survive in todays increasingly volatile, risky and uncertain financial markets, fund managers, risk analysts and savvy investors need to fully understand the best modelling and analytical techniques at their disposal. Hedge Fund Modelling and Analysis Using Excel and VBA shows them how.

Coauthored by two respected authorities on hedge funds and asset management, this implementation-oriented guide shows you how to employ a range of the most commonly used analysis tools and techniques both in industry and academia, for understanding, identifying and managing risk as well as for quantifying return factors across several key investment strategies. The book is also suitable for use as a core textbook for specialised graduate level courses in hedge funds and alternative investments.

The book begins with an overview of the industry, the major classes of hedge funds, and the most common investment strategies employed by hedge fund managers. This is followed by a critical assessment of the major information sources, including prominent commercial hedge fund databases and the indices and benchmarks they produce. The authors reveal the limitations and inherent shortcomings of each data source, while highlighting common problems and pitfalls associated with interpreting and utilising the summary data they provide.

The book provides hands-on coverage of the visual and theoretical methods for measuring and modelling hedge fund performance with an emphasis on risk-adjusted performance metrics and techniques. A range of sophisticated risk analysis models and risk management strategies are also described in detail. Throughout, coverage is supplemented with helpful skill building exercises and worked examples in Excel and VBA.

The book’s dedicated website, www.darbyshirehampton.com provides free downloads of the data, Excel spreadsheets and VBA source code used throughout the book as well as other relevant and useful resources.

A comprehensive course in hedge fund modelling and analysis, this book arms you with the knowledge and tools required to effectively manage your risks and to optimise the return profile of your investment style.

PAUL DARBYSHIRE gained his PhD in Theoretical Physics from King’s College London and then began his career working has a Quantitative Analyst and Trader at HSBC on the Exotic Derivatives and Structured Products desk. He has subsequently been involved in the development and implementation of a variety of trading and risk management platforms for a number of major investment banks around the globe. Over the past several years Paul has been responsible for the analysis and design of cutting edge algorithms in the development of behavioural finance models at Oxford University. Paul has also provided many private equity firms, hedge funds and asset management companies with consultancy in areas such as dynamic portfolio optimisation, trading platform design, software engineering and risk management.

DAVID HAMPTON gained his PhD in Electrical Engineering from the Queen’s University of Belfast and an international MBA from Institut Superieur de Gestion in Paris, New York and Tokyo before joining Bank of America Capital Markets in London. David was previously an Adjunct Finance Professor at Skema Business School in Sophia Antipolis where he taught Financial Engineering and Excel/VBA Programming at the MSc level. At EDHEC Business School in Nice, he was responsible for managing their range of five MSc courses as Assistant Dean of the Financial Economics Track. An NFA registered CTA since 1997, David has been active as a consultant to the hedge fund community and as a Hedge Fund Manager with particular expertise in Global Macro Managed Futures and Long Short Equity investment styles.

Both David and Paul are Directors of darbyshirehampton; an innovative quantitative research, advisory, and consultancy firm specialising in hedge funds and the alternative investment industry. Website: .