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Ponzi Finance And The Hedge Fund Industry

Author

Listed:
  • WILLI SEMMLER

    (Economics Department, New School University, 6 East 16th Street, New York, NY 10003, USA;
    Center for Empirical Macroeconomics, Bielefeld University, P.O. Box 100131, 33501 Bielefeld, Germany)

  • RAPHAELE CHAPPE

    (Economics Department, New School University, 6 East 16th Street, New York, NY 10003, USA;
    Former attorney with Goldman, Sachs & Co, 180 Maiden Lane, New York, NY 10038, USA)

Abstract

This paper presents a stochastic dynamic model that can be used to describe situations in asset management where hedge funds may inadvertently find themselves running a Ponzi financing scheme. Greater transparency is necessary to reduce such opportunities, such as audited financials, and disclosure of valuation methodologies. In that respect, new regulatory frameworks enacted by the Obama administration and the European Union are welcome developments.

Suggested Citation

  • Willi Semmler & Raphaele Chappe, 2012. "Ponzi Finance And The Hedge Fund Industry," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 15(supp0), pages 1-25.
    • Handle: RePEc:wsi:acsxxx:v:15:y:2012:i:supp0:n:s0219525912500373
    DOI: 10.1142/S0219525912500373
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    References listed on IDEAS

    as
    1. Carl Chiarella & Chih-Ying Hsiao & Willi Semmler, 2007. "Intertemporal Investment Strategies Under Inflation Risk," Research Paper Series 192, Quantitative Finance Research Centre, University of Technology, Sydney.
    2. William Vickrey, 1947. "Resource Distribution Patterns and the Classification of Families," NBER Chapters, in: Studies in Income and Wealth, Volume 10, pages 266-297, National Bureau of Economic Research, Inc.
    3. Franklin Allen & Elena Carletti, 2007. "Banks, Markets and Liquidity," RBA Annual Conference Volume (Discontinued), in: Christopher Kent & Jeremy Lawson (ed.),The Structure and Resilience of the Financial System, Reserve Bank of Australia.
    4. Willi Semmler, 2011. "Asset Prices, Booms and Recessions," Springer Books, Springer, number 978-3-642-20680-1, September.
    5. Burton G. Malkiel & Atanu Saha, 2004. "Hedge Funds: Risk and Return," Working Papers 98, Princeton University, Department of Economics, Center for Economic Policy Studies..
    6. Campbell, John Y. & Viceira, Luis M., 2002. "Strategic Asset Allocation: Portfolio Choice for Long-Term Investors," OUP Catalogue, Oxford University Press, number 9780198296942.
    7. Posthuma, Nolke & Sluis, Pieter Jelle van der, 2003. "A Reality Check on Hedge Funds Returns," Serie Research Memoranda 0017, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    8. repec:pri:cepsud:104malkiel is not listed on IDEAS
    9. Burton G. Malkiel & Atanu Saha, 2004. "Hedge Funds: Risk and Return," Working Papers 98, Princeton University, Department of Economics, Center for Economic Policy Studies..
    10. Eckhard Platen & Willi Semmler, 2009. "Asset Markets and Monetary Policy," Research Paper Series 247, Quantitative Finance Research Centre, University of Technology, Sydney.
    Full references (including those not matched with items on IDEAS)

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