Speaking at the Quant Congress USA conference in New York this morning, Craig Lewis, chief economist and director of the division of risk, strategy and financial innovation at the SEC, described how the revelation of extensive fraud at an investment firm run by Bernie Madoff in December 2008 was the catalyst to developing a model that would flag hedge funds for further investigation.
“We basically said what would be the characteristics that might suggest there is something unusual going on at a particular hedge fund,” said Lewis. “So if you have low volatility and you have steady return performance, the chances are that you are somebody we ought to be taking a deeper look at….
via Quant Congress USA: SEC using models to look for the next Madoff – Risk.net
