New ECB Model Aims to Predict HF Liquidations
| Jun 16th, 2009 | Filed under: Today's Post | By: Alpha Male |
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A lot of the hedge fund research we review each day on AllAboutAlpha.com is produced by academics. But occasionally, we come across some very interesting tidbits from regulators and central banks. The ECB’s semi-annual Financial Stability Review (FSR) is one such example (see previous posts).
In keeping with previous reports, the new 1H 09 ECB FSR is A-OK. As usual, it provides an update on industry leverage, cross-correlation and industry attrition. The chart below right from the report the industry’s annual launch and closure rates (click to enlarge).
Obviously, the past year has been rough on the hedge fund business. But what exact are the factors that lead to such an increase in hedge fund liquidations (red) and attrition (green)? This edition also contains an interesting “Special Feature” on estimating the probability of hedge fund liquidations (downloadable separately here).
As you might guess, the specter of hedge fund liquidations is never far from the thoughts of a financial regulator. As the report points out: More…
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[...] might be help at hand. The ECB has a pre-warning model that may predict some HF meltdowns. (H/T [...]