Hedge funds are institutions that invest in a wide variety of instruments, from stocks and bonds to

Question:

Hedge funds are institutions that invest in a wide variety of instruments, from and bonds to commodities and real estate. One of the reasons for the success of this industry is that it manages and risk better than other financial institutions. Using the concepts and ideas described in this chapter, discuss how a hedge fund might maximize and minimize risk by investing in various financial instruments. Include in your discussion the concepts of means and variances of linear composites of random variables and the concept of independence.
Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...