Hedge Funds


In general this course is designed to help students to structure their own investment and trading decisions in the context of the financial markets. The course has a strong analytical component, as most investment strategies will be back-tested and analyzed from an historical perspective. It should help to prepare the students to work in a trading room of a bank or a hedge fund.

General characterization





Responsible teacher

Pedro Ouro Lameira


Weekly - Available soon

Total - Available soon

Teaching language




Expected Returns: An Investor's Guide to Harvesting Market Rewards, Antti Ilmanen.


Macroeconomic Reports from brokers and investment banks;

Academic papers on investment strategies.


Teaching method

There are two classes per week. Each class is of 1h20m. The classes consist of discussions about hedge funds and their most common investment strategies. After a brief presentation of each investment strategy, real life examples will be discussed in detail. Classroom participation is expected and required. Students are expected to conduct their own research on existing hedge funds (Bloomberg and Internet) and on investment/trading strategies (look for academic papers on libraries or internet databases).

Evaluation method

The Final Exam is mandatory and must cover the entire span of the course. The weight of the final exam should not be less than 30% nor exceed 70%. The remainder of the evaluation can consist of class participation, midterm exams, in class tests, etc. Overall, written in class assessment (final exam, midterm) must have a weight of at least 50%.

  • 3 Assignments (individual): 30%

  • Final Project (in group): 30%

  • Exam (individual, mandatory): 40%

  • Adjustments of 2 points in the final grade (in either direction) can eventually be made, based on other information available such as participation in class and contribution to the coursework.

  • Assignment 1 – Portfolio back-testing.

  • Assignment 2 – Equity long-short strategy.

  • Assignment 3 – Macro scenario + Macro trades.

  • Project - Develop New Investment Strategy.

Subject matter

  • Overview - What are Hedge Funds, history, evolution, main strategies, performance In search of Alpha– Methodology;

  • Investment Strategy: Trading - Systematic vs Opportunistic, technical vs fundamental vs other, back-testing, data-mining, over-fitting, trading costs, examples;

  • Investment Strategy: Arbitrage - Definition, pure arbitrage x relative value, geographic / product arbitrage, statistical arbitrage, pair trading, relative value baskets;

  • Intraday strategies - examples with Matlab;

  • Investment Strategy: Macro – reflexivity theory, simulation of real time investment decisions Fixed Income Arbitrage – duration, convexity, basis risk, yield curve trades;

  • Volatility Arbitrage – Volatility, gamma, vega, theta, rho, plain vanilla x exotics Commodity Arbitrage - Curve slopes – contango x backwardation, roll down trade;

  • FX Arbitrage – Carry trades, interest rate differentials.