A Model for Estimating Daily Hedge Fund Net Asset Value
AbstractThis paper presents a model to use market indices to predict the daily
net asset value of hedge funds that are not market observable. The model
allows financial market participants to produce a daily mark-to-model
for their hedge fund positions, and eventually options derived thereon.
We use the historical data of indices to generate a robust estimate of
the required index weighting parameters. Empirical study shows that the
model makes reasonable predictions when appropriate index choices have
been made and produces diagnostic information that can indicate the
relative reliability of predicted daily hedge fund returns.