The following table shows the expected return (arithmetic mean), standard deviation, skewness and kurtosis for the market portfolio and four hedge funds over the time-period from 01/2002-12/2007. Suppose that today (t = 0) is December 31, 2007. Which of the following do you suspect is the most exposed to crash risk (i.e., have a small probability of a very negative return)? Fund LS is a long-short fund that invests primarily in equities; SB is a short bias hedge fund that primarily engages in short-selling, MN is a market-neutral hedge fund with similar exposures on the long and the short-side, and DER is a derivative-based hedge fund that uses call and put options on the Russell 2000 index.

	Mkt	LS	SB	MN	DER
E(r)	10%	9%	-1%	12%	19.5%
	20%	15%	12%	25%	5.6%
	1	0.4	-0.9	0	0
Skewnewss	-0.5	-0.1	0.4	-0.9	0
Kurtosis	3.5	4	4.8	6.3	3

	A.	The long-short equity fund (LS)
	B.	The dedicated short bias fund (DB)
	C.	The derivative-based hedge fund (DER)
	D.	The market portfolio (Mkt)
	E.	The market neutral fund (MN)