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

Gonçalo Ribeiro


Weekly - Available soon

Total - Available soon

Teaching language





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

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

  • 3 Assignments (individual): 30%

  • Final Project (in group): 20%

  • Exam (individual, mandatory): 50%

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