Introduction: The capital invested in hedge funds has been raised in recent years and continue to be.

Therefore, the role and the presence of these investment funds on financial markets are becoming increasingly important. The active and growing participation of hedge funds in many financial markets implies that these markets could be significantly affected if the hedge fund industry had significant pressures. The positive contribution of hedge funds to the efficiency and liquidity in global financial markets and widely recognized, but does not overshadow concerns about the risks that their activities could pose to financial stability in times of tension. The interest of investors in these funds is largely due to the performance object "absolute" that display managers. Indeed, hedge funds have the ability to manage performance uncorrelated to the market. In addition, hedge funds offer to investors, the opportunity to diversify risk exposure of their portfolio. Hedge funds are, in fact, often uses the latest developments in financial technology, which is more fully in a globalized environment. Their regulation is therefore a complex and delicate art. It can be effectively developed in the appropriate international arenas where regulators, building on experience domestic, to forge a common doctrine, integrating international problem that characterizes this sector. European Central Bank blames them, beyond their lack of transparency, the same management strategies that lead them to invest and withdraw from the same assets, in the same places and at the same time. Conversely, proponents of this management argue that hedge fund activity has positive effects in some markets. According to them, hedge funds can improve the liquidity of certain niche markets, which has the effect of facilitating trade there. Hedge funds are now increasingly found in the investors' portfolios. Most institutions choose to invest in hedge funds to benefit their benefits in terms of portfolio diversification. In a co-text which international diversification is limited, the profiles exposure of hedge funds is an asset very sought after by this category of investors thanks to the effect of correlation. The development of alternative and hedge fund industry has allowed the development of management models to benefit the effect of correlation is presented as an indicator of dependence. Since the mid-90s, these themes feed very controversial debates tend to intensify, as and as the industry develops and is part of the investment environment of a majority of investors. There are speeches extolling the talents of managers and their ability to provide an absolute performance regularly, those who focus on their poor performance and in particular the heavy losses they generate. Good performance as sought by the proponents of alternative management does not unanimous, especially among critics who announce the imminent disappearance of a lot of industry performance and risky. Undoubtedly the dependence relationship between random variables plays a very important role in many areas of mathematics. It is a widely studied topic in probability and statistics. Very wide variety of this concept has been studied by many authors to propose definitions and useful properties with applications. A measure of dependence is regularly used linear correlation Bravais Person (1896), this correlation measures the linear relationship between two random variables X and Y, and can take any value from the interval [-1,1]. The linear correlation coefficient is a measure of dependence easy to calculate. This flag is effective when the dependency relationship is linear and the universe considered Gaussian. It is very useful for the elliptical family of distributions (such distributions because for the non-correlation implies independence). However, this measure of dependence often used by practitioners has several limitations quoting some problems related to this concept:

-The correlation coefficient is undefined if the moments of order two random variables are not finished. This is not an appropriate measure of dependence for heavy-tailed distributions where the variances can be endless. -It is easy to construct examples where the linear correlation coefficient of Pearson is not invariant under strictly increasing transformations, for example the correlation between two random variables X and Y is not the same between log (X) and log (Y), because the data processing can affect the feedback of correlation. -correlation is simply a scalar measure of dependence; it cannot tell us everything we want to know about the structure of dependence. -positive absolute dependence is not necessarily a correlation of -1. In finance, the Gaussian case is rarely used to address this Vons we use other indicators of dependence based on inconsistencies and concordances observed in a sample. We use then the correlation coefficient and linear and nonlinear nonparametric, as the rate of Kendall's or rho Spearman. Are good indicators of the overall dependence between random variables? In addition, they are between -1 and 1 as the linear correlation coefficient value of 1 for example means a perfect match. Measure the dependence using statistical indicators is one thing, modeled by a dependence function is another, Copula meets this objective. The will be defined in this framework from the copula parameters (when it is parametric). The dependence between the random variables is completely described by their joint distribution. However, we can separate the behavior of the marginal distributions of dependence structure. It achieves this thanks to the use of copulas which are a statistical tool to connect the joint density with marginal densities. Is the copula function that will contain all the information about the dependence structure of the model? The copula is a statistical tool that has many advantages, both for statisticians for financiers. Further flexibility in the implementation of the analysis multivariate copulas allows a wider selection of the joint distribution of financial time series. Copula functions allow a less naive statistical dependence of a finance based on the traditional measure of correlation. In addition, they allow probability distributions attached less restrictive, taking better account of the stylized fits finance. They allow the consideration of multidimensional distributions rather general and independently of the marginal laws may have different laws and arbitrary. Therefore, they can get rid of some unrealistic assumptions made in empirical studies.

Chapter1: hedge funds For active investors it is difficult to ignore the existence of hedge funds boast some of the other trades and try to highlight the risks. Long reserved for the wealthy investors, hedge funds now reaches an audience of more and wider. Through savings products offered in the major banking networks, individuals can now access to alternative. The objective of this chapter is to focus on this tremendous growth in the first place we try to define what a hedge fund before putting in evidence the characteristics that distinguishes them from traditional funds. In a second step we will focus on the development and progression noticed the hedge fund industry. Alternative investments have experienced after the Etats_Unis, increasingly popular with investors and private institutional worldwide. This phenomenon of globalization has been facilitated by poor market conditions of the 2000s which showed the benefits of this management style compared to traditional management. managing to generate returns uncorrelated to the markets, management alternatives has been the most successful of interest from investors to the extent that these management practices have sometimes been portrayed as the miracle solution to uncertainty about the market trends However, it is important to note that alternative investments is still not well understood by market participants. this term refers to management practices very varied, it is difficult to decipher because of the lack of transparency of the managers and an absence of legal obligations in the field of information dissemination. subject of this chapter is to present what is covered by the hedge emphasizing some of their distinctive features compared to traditional funds and deal with the following the appearance of the development of the hedge fund industry at the end to focus on investor enthusiasm for this kind of its own. in the absence of legal definition, hedge funds are assigned a multitude of definition. the heterogeneity of the industry and the changing structure of funds, make it unrealistic to seek to agree a single definition and general information. it would seem more appropriate to identify hedge funds from their investment Stategy and certain specificities that differentiate them from other funds. this first point aims to define what are hedge funds. After outlining some definitions found in the litratre, we present the specificities of the main strategies called "alternative". this is in response to recall some features of hedge funds to their own size, liquidity, their broadcast natio information, the remuneration of their managers or their investors. it is primarily these characteristics that differentiate them from tratitionnels funds such as mutual funds. A general definition of a hedge fund: state a general definition of hedge funds does not appear as a stain facile.ces funds with no legal definition, they are given almost as many definitions and varied as the number of actors and scholars who are interested . the data providers Tremont TASS Research Limited, for example, defines a hedge fund as a fund that, to achieve an absolute return objective, use of long positions and discovered to their manager and provide the one hand, flexibility in their investment style and second, with a commission to performance.

Van Hedge Fund Advisors International, another company specializing in alternative investments, makes the distinction in its definition between onshore funds, domiciled in the United States and other so-called offshore funds. She characterized mainly by onshore funds with their status (or a private company limited responsibility) and by their type of investments (government securities or derivatives). as offshore funds, they are presented as funds domiciled in offshore locations, not governed by American law and use of hedging techniques for complex inputs reduce the risk. the regulator of U.S. financial markets, the Securities and Exchanges Commission (SEC), characterized hedge funds as follows: "like mutual funds, hedge fund investors money and pol Those funds invest in Financial Instruments year in efforts to make a positive return. Many hedge funds seek to profit in All Kinds of Markets by leveraging Pursuing speculative investment and Other practices That risk may Increase the risk of the loss of investment " However, the definition given by Cappocci [2004], seems by far the most comprehensive to describe what a hedge fund. He states that sagit "..." a brief overview of these definitions, only to realize that the hedge funds cannot be treated as hedge funds suggests that the literal translation of the term hedge fund. In reality, this generic term includes entities using management strategies and risk profiles very different. While some strategies have a dominant other speculative rather focus on the writing market risk. Despite this heterogeneity, two features common to all hedge funds can be highlighted. One hand, this type of fund is based on the hypothesis that there are market inefficiencies that can be exploited by sophisticated arbitrage techniques to generate superior gains to those offered by traditional management. Secondly, the management strategies they employ differ from those of the conventional management including their complexity, the type of financial instruments used and the dynamic nature of their positions and their exhibitions. Today, hedge funds would count almost as many conventional management strategies including their complexity, the type of financial instruments used and the dynamic nature of their positions and their exhibitions. Today, alternative management strategies would count almost as much as money. It might therefore be more appropriate to speak of management "alternatives" For the sake of classification, hedge funds are usually grouped by broad categories of strategies. Note that the funds raised in the same group may be in some respects, significantly different because each manager specializes in strategy, the declines following its own aspirations. However, the categorization of funds by major strategies remains no less a reference for any investor engaged in a process of alternative investment products. Insofar as each group of strategies has a profitability profile-specific risk, the investor may move towards the funds in the category that best suits his risk aversion and expectations for performance and diversification.

Today there are a wide variety of classifications more or less close according to the criteria considered. This great heterogeneity is illustrated in particular in the main classification system developers, data providers specializing in the management alternatives. Each of them has its own input method of grouping funds based factors such that the markets in which they operate, the geographical area covered, the tools used, the management processes adopted.. Major categories of alternative strategies: This paragraph is devoted to the presentation of the major categories of alternative strategies. this list is not intended exhaustive but aims to give the reader an overview on the main management styles used by hedge funds. this classification into two main families of strategies, non-directional and directional, was adopted in reference papers else that Fung and Hsieh [1997]. The non-directional strategies: The non-directional strategies are known to be poorly exposed to equity markets. such strategies seek to exploit arbitrage opportunities and identifying structural deviations of bad judgments and short-term market inefficiencies between similar securities. Generally, these managers will simultaneously take long and short positions in securities exposed to similar risks to generate earnings while controlling market risk. The four main non-directional strategies are: the convertible arbitrage strategies, strategies Fixed Income Arbitrage, Equity Market Neutral strategies and Event Driven strategies. Arbitrage strategies of convertible bonds (convertible arbitrage) seek to exploit the complex relationship between convertible bonds and underlying shares. Typically, it involves buying the convertible bond of a company whose price does not reflect its value, while selling short the parallel action of this same company. Arbitrageurs seeking to invest in convertible bonds whose price tends to decrease more slowly than the underlying stock out by following the evolution of the latter on the upside. if this approach leads to exposure to a risk of non-achievement in the implementation of the operation, it allows to benefit futures market inefficiencies without incurring a directional risk of this position is initiated way to generate profits on both the convertible security (interest rates and purchase option) and short selling the underlying asset. Whereas there is no fixed relationship between the price of convertible bonds and that of action underlying the risk of loss is real. financial globalization and dissemination of information make this technique more and more inefficient. Currently, these traders are forced to rely on quantitative analysis extremely extensive, particularly in risk assessment. the strategies of arbitrage fixed income securities (fixed income arbitrage) try to exploit pricing anomalies that exist in the markets for fixed income securities such as bonds of states and businesses. it is take advantage of the yield curve of interest rates by identifying mathematically deviations from long-term relationships between product rates. after having found such differences, arbitrageurs take long and short positions in interest rate products such as attempting to limit their exposure to changes in interest rates. why they try to select the instruments whose reaction to interest rate is substantially identical. Generally, these strategies make use of derivatives such as futures and swaps. the ability of managers to identify mispriced securities with each other, determines in part the performance of these strategies. to identify these price differences, analysts

are based on sophisticated analyzes from the yield curve, volatility curves, the duration, convexity, the rating of the issuers and options related to the securities. these strategies are the most complex of alternative strategies. they are working mainly in the U.S. because of the good liquidity of their markets. after having experienced good growth in 90 and disinterest after 1998, such new strategies seems to attract arbitrageurs, attracted by the new arbitrage opportunities in these markets. the Equity Market Neutral strategies aim to take advantage of anomalies in the equity markets while neutralizing exposure to market risk. these funds seek to eliminate entirely the risk of markets which are generally exposed funds Long / Short Equity. Indeed it is rare that the combination of position and short loins, even in the same amount, make disappear the market risk since the betas titrs of (their sensitivity to the market) are generally not identical. managers want to keep only the specific risk of selected titles. For this, they use futures contracts on indexes or combine short and long positions so that the beta of the portfolio is zero. performance of these funds depends on a hand, talent managers in the selection of securities and secondly, the reinvestment of profit from short sales. managers with competence in the selection and combination of titles, will get an uncorrelated markets. these funds are sometimes called money "pure beta", which are influenced by market developments. the main difficulty lies in maintaining that position to market neutral insofar as the betas of the securities change over time. Theoretically, this strategy is deemed to generate positive returns regardless of market conditions. However, much of the profitability of this strategy depends on the talent of the managers and the adequacy of models on which they rely. in times of bear markets, such strategies is particularly interesting because the short positions can compensate the losses generated by the long position. by cons in periods of rising markets, performance is generally much less attractive it makes sense that many managers to use leverage to make them more attractive. the event strategies (Event Driven) seek to exploit, faster than the market, detailed information concerning the life of one or more companies as the announcement of a merger or acquisition, a restructuring of debts or capital, an affiliation of a sale by compartments ... it is mainly the uncertainty on the result of these events created arbitrage opportunities. well in advance, they created the expected profit outcome. generally, these funds are grouped into two categories: the Distressed Securities Fund Group and the Risk Arbitrage funds. the Distressed Securities strategies are designed to take advantage of situations such as reorganizations, bankruptcies and other critical situations in the life of a society. following the announcement of a debt restructuring for example, the managers will make the purchase of securities of the company if they believe that this restructuring exercise will increase their value. This usually involves a relatively long investment and especially since it is impossible to predict the outcome of the rise assuming that takes place. Moreover, this kind of investment presents the disadvantage of being generally relatively illiquid. the strategies _ Merger Arbitrage or Risk Arbitrage are implemented as part of an OPA-OPE. they seek to exploit the gap between the price announced by the purchaser and the price at which the target company deals in the market. this gap enhances the probability of failure of the transaction announced (refs final ownership, antitrust law ...) as valued by the market. finalization of the transaction generates the convergence of the course and thus generates the expected profits. performance of these funds is dependent on activity in mergers and acquisitions. this dependence

grows generally cyclical funds to diversify their portfolio by acting on other events in times of low activity. directional strategies: the directional strategies seek to take advantage of major trends and movements (trends) that emerge from the financial markets. managers use their skills for macroeconomic analysis and / or technical analysis to anticipate or follow the creation of these movements (sometimes referred to as market timing). among the directional strategies include five main categories: global macro strategies, strategies Trend Followers, Long Short Equity strategies, strategies and Emerging Market Strategies Short Selling. the Gobal Macro strategies have been developed in order to exploit some macroeconomic imbalances by detecting upward or downward trends in exchange rates, interest rates, equity prices or inflation. it is the convergence of prices towards their equilibrium level which is expected to produce the expected profit. the process of choosing investments is top down (top down). managers begin by analyzing the overall economic environment before moving gradually towards the choice of asset classes. the challenge of the Manager is not only to identify imbalances settlement but to estimate the inflection point of a trend that is when it will reverse to return to equilibrium. for this they are based on fundamental analysis or technical rather complex. these strategies have considerable flexibility in terms of investment, both in terms of markets and asset classes. reallocations of portfolios generally occur as soon as a new trend is identified exploitable. the challenge remains for a manager to know identify the most favorable movements to position and then withdraw. the strategies Trend Followers seek to take advantage of the cyclical nature of markets putting themselves in the wake of a trend. very developed in the USA, they are mainly used by funds futures contracts, usually called Commodity Trading Advisors (CTA). CTAs or managed futures, funds are investing in the futures markets to exploit future market trends. As with global macro strategies, trends are detected based on the intuition of managers (discretionary approach) or complex mathematical models (systematic approach). CTA members if funds are not always considered true hedge funds, their investment structure and function led many authors to present them as a special category of hedge funds. strategies and long / short equity strategies are implemented by the first hedge fund in the 70s. Typically, the managers build a stock portfolio to maximize profitability venture the couple. For this, long positions in securities determined to be undervalued are combined with short sales of shares overvalued. mostly stock selection is based on a thorough analysis of issuers. the final portfolio is therefore representative of the managers' vision of the true value of titres.la subjectivity of managers leads to an uncertainty about the result of the operation because of poor advance can cause substantial losses. while some managers do not operate on import which securities offering an opportunity for profit, other hand has specialized. In the first case, the managers do not set constraints on sectors and markets in which they select their titles. in the second case, the managers focus on a particular area for which they enjoy a comparative advantage. there are funds focused on subsistence values (value), on growth stocks (growth), the small caps (small caps), on large-cap (large

caps) or the Paris-type momentum. these strategies are now commonly used as the simplest to implement. they are generally adopted by the new managers taking their first steps in alternative. Emerging strategies Market gather the specialized funds in securities of emerging countries. the term is attributed to countries emerging through a phase of modernization and growth and saving, according to World Bank, per capita GDP of less than $ 7,620. they correspond to countries in Latin America, Eastern Europe, Africa, Middle East and the Asia Pacific region. to identify existing opportunities in these markets, the managers analyze rigorously the local companies in order to judge their financial strength, their growth potential to compete, their ability to create value but also the macroeconomic policy in which they operate. country risk and political problems but also illiquidity and lack of access to information, are major reasons that the number of funds specializing in such securities, is still limited. its low development also reflects the constraints imposed by some countries on short sales. even when they are authorized, investors do not usually find lenders of securities except on larger capitalization companies. this is why That a majority of hedge funds active in emerging markets, have a positive net exposure. However, the sophistication of these markets should allow in the future to resort to a greater extent to short sales. Short Selling over the funds, their goal is to take advantage of overvaluation of certain securities by using the sale of assets short. Unlike other alternative strategies, their net exposure is always negative. managers choose either to maintain ever more short positions than long positions either, only to realize short sales. these strategies have therefore tendency to generate gains when the stock price decreases. their implementation is particularly inappropriate in the period of stock market rally as it did in the 90s. by cons, since the crash of 2000, funds specializing in this strategy have begun to make profits. employment of this strategy, however, poses some problems in some countries where regulations on short selling is not favorable. Australia for example, the taxation of gains generated by this technique makes it unprofitable. in many emerging markets, short sales are even prohibited. to these regulatory and tax barriers is sometimes added without lenders of securities, especially on small caps. Finally, it is important to note that if the expected gains are capped as the price of a stock can not be negative, the potential losses on the other hand, are unlimited in that price growth is theoretically infinite. we just present the main management styles put in works by single-strategy funds. However, another possibility is open to investors who want to access management alternatives. there are also funds several strategies combining individuelles.il is multi-strategy funds and funds of hedge funds (funds of hedge funds). their characteristic is to provide investors with a diversified product, less sensitive to the specific risk of each individual strategy. limited funds in their size and liquidity: the purpose of this paragraph is to draw attention to two specific hedge fund involved the implementation of their investment strategy. this is to emphasize the consequences of this management in terms of size and liquidity of funds.

the existence of a critical size:

Unlike traditional management where increasing the volume invested will increase fee income while reducing the cost of passages to orders, hedge funds have not always interest to increase the amount of assets they manage . this size limit, is mainly due to the nature of the strategies implemented by the managers. the niche strategies and measures to exploit market anomalies, do not permit an indefinite increase in the size of funds. For example, certain strategies need to be able to move quickly on market (themselves sometimes small) implying a controlled size. secondly, the results of an arbitrage strategy is limited by the number of team the opportunities that analysts can identify. if its size is too large for the available opportunities, the fund is likely to record modest performance. to avoid these situations, many hedge funds to fix a critical size beyond which they refuse all new subscriptions. access to closed funds is only possible if an investor withdraws or through a fund of hedge funds that have invested there. Some funds even provide in their contract remboursemet the possibility of capital if the managers feel it would increase the profitability of the fund. this was the case of LTCM in 1997 or in 2004 Caxton Associates who each remboursrent miliards nearly 2 dollars. However, all managers do not adopt this system size limit. Indeed, some consider it possible to absorb an input stream smoothly without the risk of destabilizing their investment policy. including what is revealed by a study Hennessee Group in January 2001 among 667 managers. it showed that the problem was less the size that the flow of new subscribers: an increase of less than 10% per quarter, would be appropriate to allow managers to adapt their structure. However, keep in mind that the funds that specialize in certain niche strategies will always be limited by the size of the market in which they invest. funds lack transparency: lack of transparency of hedge funds is a well-known by investors. Lhabitant [2001] even speak back box to define the alternative universe. most often, the funds are restricted to communicate some general information about their activities and their management style. compared to traditional mutual funds, hedge funds generally do not give any information about the positions they take. therefore, control and monitoring of the quality of decisions taken by the managers, are almost impassable. this opacity maintained by the managers, found mainly two explanations. the first is related to conditions of effectiveness of investment strategies-implemented by the managers. Indeed, the result of the majority of strategy depends largely on the discretion of the managers in structuring and managing portfolios. in the case of merger arbitrage strategy and acquisition for example, the manager has any interest not to disclose his intentions too. Whereas the success of such arbitration depends on the number of shareholders approving the transaction, the public announcement of its objectives could increase the number of shareholders and therefore reluctant to derail the project. Moreover, it is likely that by disclosing its positions, a fund attracts new players who seek to exploit them as this event. more likely to mediate the transaction, expected margin will be reduced and possible liquidity problems may arise.

a recent development: The term hedge fund is not new. it appeared, for the first time, in an article by Carol J. Loomis published in Fortune in 1966. the latter was interested in funds Alfred Winslow Jones, accounted for almost 15 years ago in the United States. This fund was already distinguished by the originality of its management strategy as well as at speeds faster than that of the best mutual funds at the time. created in 1949 as a private partnership (general partnership), this fund was intended to exploit the poor evaluation of securities in the equity markets while protecting themselves from market risk. For this, Jones was counting on the innovative combination of techniques such as short selling and leverage. betting on its ability to buy stocks considered undervalued and sell short parallel overvalued securities, it should be able to trade profitably and this irrespective of the assessment of market conditions. the usage of storage leverage then allowed to increase the result of the operation. the commission's performance that he planned to pay the skills of managers (20%), represented an innovation over funds for classiques.il was Jones, a way to motivate managers to identify the performance rather than seeking to increase the amount of capital managed to reach more management fees. by investing personally (40% of fund assets), Jones wanted to show investors the confidence he gave to the skills of its team and its technical management. before the spectacular results generated by this management strategy, many managers formed their funds on the original model of Jones. in a report published in 1969, the securities and exchange commission believes that the end of 1968, there were 140 funds with most less than a year old and over $ 2 billion in assets. year 1969 also marked a first fund creation hedge fund, leveraged capital holdings, domiciled in the Netherlands Antilles. although the financial press that gave them no very little interest at the time, these funds dgagrent of very good performance until the late 60s. the rising trend of the market and the use of excessive leverage, allowed managers to record substantial returns. However, the market downturn in 1969-1970, marked the beginning of a period of great difficulty for hedge funds. excited about the spectacular gains of the 60s, many managers were gradually diverted from the basic principle stated by Jones in reducing their coverage. seeking the best performance, they decreased their short sales as too costly, while implementing important levers to their long positions. when the market suffered sharp declines successive dice 1969, heavy losses were recorded. the 28 largest funds presented in the study of the SEC [1969], have lost about 70% of assets it held in 1968 (Caldwell [1995]). this market downturn, combined with the massive demands for repayment of investors, even caused the failure of five of them. the Novels market declines in 1973-1974, attributed largely to the oil crisis, yet diminished the size of the industry. in 1977, the surviving funds, mostly small, managed just 25 MIILLIONS REFINANCING outstanding and this in the utmost discretion. it was not until the late 80s, so the financial press begins to extol the merits of hedge fund strategies. this period is marked by the development of the second generation of hedge funds: funds "global macro". shortness of breath before the original strategy of Jones, the managers such as Julian Robertson or Gerges Soros developed a management strategy aimed at achieving paris on the future evolution of major macroeconomic indicators such as interest rates, the currency or equity markets. gains spectacular Tiger Fund and Quantum Fund, managed respectively by J.Robertson and G.Soros, attracted many managers to this new management practice.

the favorable environment created spoke construction of the European Economic and Monetary Union, participated in the surge of interest of the managers for this type of strategy. has the time, it comprised more than half of the funds. However, it takes 90 years to see the hedge fund industry know its greatest development phase. when they were barely a miller in the late 80s, their numbers have more than quadrupled in 10 years. attracted by the opportunities offered by gains of these alternative strategies in a context of low interest rates and equity market bull (bubble), many managers turned away from traditional management to form their own hedge funds. compared to the previous generation, these funds were mostly smaller and had a greater heterogeneity in terms of strategies. this change of state of the hedge fund industry, is mainly due to the evolution of arbitrage opportunities offered by markets and the development of new financial instruments such as derivatives. since the bursting of the speculative bubble in 2000, the number of hedge funds continues to grow. Van Hedge Fund Advisors International and HFR feel they are now about 9,000 individual funds with a total of over 1.1 trillion of assets. However, growth in funds of funds, was by far the most significant in recent years. today they represent about 25% of assets. for numerous scientific and professional studies predict that the pace of industry growth expected to continue in the future. Van Hedge Fund Advisors International believes that the number of funds and assets under management-are projected to increase by about 10% to 15% per year over the next two years. The consulting firm KPMG estimates that by 2010, hedge funds should attract a worldwide total of two trillion dollars in assets. Capocci [2004] even likened the development of the hedge fund industry to that experienced by mutual funds there ten years. In addition, it provides that the increased transparency and regulation should promote increased demand and especially institutional investors. Lhabitant [2005] states that the "mass exodus" of traditional managers to hedge funds, should even accelerate in the coming years. He justifies this migration by the lure of compensation to the perforation and a desire to avoid an approach "benchmarked" (argument in absolute value). However, the most significant development should be observed at the repair of capital managed by the industry. it is likely that the globalization process that began some years ago, to continue promoting geographical areas such as Europe and Asia. the progressive globalization of the industry: cradle of the hedge fund industry, the U.S. remained, for nearly 45 years, the place of investment and domicilation exclusive hedge funds. gold, since the mid-990s, the evolution of European and Asian markets, have gradually semlne amonc a genuine process of redistribution of assets managed by the hedge funds. In the end of 2005, the hedge fund investment in Asia and Europe, respectively, was estimated at about 4% and 25% of assets managed by the industry. Although these figures further emphasize the

hegemony of North America (U.S. and Canada) even with near de70% of assets under management in the industry, the interest of hedge funds in Europe and Asia seems to be confirmed over the years. Some fund domiciles in the United States even choose to invest exclusively. Capocci [2004] estimated that in 2003, these funds represent U.S. nearly 7% of all funds invested in European markets. the growing involvement of hedge funds in Europe: during the past 10 years, the development of hedge funds in Europe was by far the most dynamic. the amount of capital invested in Europe by such funds today represent about $ 250 billion when he was only a billion dollars, there are fifteen years. on the number of individual funds domiciled in Europe, their numbers have more than doubled between 2000 and 2003, from less than 200 to more than 500 funds. By comparison, the growth of onshore funds (domiciled in the United States) on the same period would have been only 17% (30% if we include offshore funds). the majority of European funds is about 72%, is domiciled in Britain with more than 75% of assets invested in hedge Europe. the tendency is still to increase the weight of some countries such as Switzerland, France or Sweden, which in 2002 housed 6%, 4% and 2% of European funds with 2.3%, 2.6% and 3.6% managed assets. also note the pat significant (approximately 10%) of invested assets in Europe, but managed funds domiciled in the United States. it may be interesting to note that access to alternative investments is so different depending on the country. while in Germany, the focus is mainly on funds of hedge funds in France and Belgium, it is mainly the capital-guaranteed products that are needed while in Britain, the funds are usually closed and sides. in the future, we can expect that in Europe the growth rate of the number of funds and assets under management, will continue. several arguments can be put forward to justify this evolutionary perspective. First, the share of European capital invested in hedge funds, or 1%, still seems low compared to the potential for development offered by Europe. Insofar as European markets provide a greater number of arbitrage opportunities that American markets, it is hoped that these inefficiencies will encourage more managers to invest. Indeed, despite the approximation of European markets in the context of economic and monetary union, there are still between countries, differences in taxation or of economic and monetary policy, providing opportunities for gains to hedge funds. they will be more encouraged to position themselves as some European markets saw their liquidity improved significantly, sometimes as a result of the activities of hedge funds themselves as to the obligations walked convertible. Moreover, the activity of hedge funds in Europe should benefit from increased demand from institutional investors. the European market appears perfectly adopted their expectations for portfolio diversification. in fact, progressive enlargement of the range of European hedge funds allows them to hold a diversified alternative pocket, composed of several different strategies and places for investment and residence. This increased demand is more likely in Europe, the wealthy investors are not the only ones to have access to alternative investments. Indeed, the legislation is less restrictive European countries and

the United States regarding the characteristics of customers and especially hedge funds of funds of hedge funds. therefore, the potential investors is more important. the European institutions are also more likely to offer their clients to invest indirectly in hedge funds through funds of hedge funds. new opportunities in Asia: parallel to its European development, the hedge fund industry is turning increasingly to the new opportunities offered by many countries on the Asian continent (Australia, South Korea, Hong Kong, Japan, Malsie, Saingapour and Thailand). long remained outside the concerns of managers, this part of the world is beginning to reap the benefits that it provides the development of its markets. easing in some countries, legal constraints on the techniques of arbitration, including enhanced access to derivatives and short selling. in such a condition, managers today have the means necessary to the operation of market inefficiencies that provides Asia. before this development, the implementation of complex strategies was not really possible, and most often limited to long positions. performance as Asian funds emerged, were as unattractive to investors to the extent they followed the evolution of these market indices and suffered high volatility. they were able to generate good profitability bullish period, as was the case in 1999 (more than 80% return for certain funds), it was not without risking heavy losses from the first big market downturns (in 2000, for example, some funds will record losses of more than 30%). considered too risky, the Asian funds did not pass up the capital needed for their development. it is only recently that the development of hedging techniques provides managers the means to cover their positions to get rid of the market risk. every reason to believe that these improvements will enable Asian funds to seduce more and more investors. It is estimated that hedge fund investments in Asia now represent about 3% of assets managed by the industry. they are managed mostly by funds domiciled in Asia (one hundred) with more than half in Japan and the rest in offshore jurisdictions belonging to this zone. investment hedge funds in Asia is expected to continue growing at the same rate as the influx of capital enjoyed this part of the world. the coming years to improve the liquidity of markets combined with the phasing constraints imposed by some should not promote the growth of hedge funds operating in Asian markets. a favorable regulatory environment: in the absence of a legal framework specifically dedicated to their work, hedge funds are still less regulated financial products. the virtual absence of regulatory constraints, provides the perfect setting for managers to implement their investment strategies. However, critics of hedge funds are working to highlight several drifts that these gaps. for some, this freedom is legally responsible for a financial crime that curir risk the normal functioning of markets. there is, for example, many operations laundering through offshore funds domiciled in jurisdictions such as undemanding Bermuda, British Virgin Islands, the Caribbean ...

However, supporters of the establishment of strict regulation of hedge funds, emphasize that this is especially destabilizing nature of some of their practices on the normal functioning of markets, which is worrying. can recall the case of funds George Soros Quantun Fund, which was accused of having precipitated the exit of the British Pound in the EMS in autumn 1992. in 1994, hedge funds have also been brought officials turmoil in the markets required. in 1997, it is the hedge fund community as a whole, which was slammed by the Malaysian authorities during the collapse of the main Asian currencies such as the Ringgit. but it is especially since the near-collapse of LTCM in 1998 that opponents of alternative management demanding strict control of activities of such funds. some stress that their influence can be particularly significant when operating on certain niche markets such as emerging markets and this the more so when others begin to imitate them. since the financial debacle of LTCM, the attention of regulators and the financial community are also concerns that the systematic risk of certain losses hedge funds may pose to markets. aware of the adverse effects caused by certain practices of hedge funds, regulators are now seeking to establish strict rules to better control them. it is for the legislature on the one hand, to protect investors against the dangers of hedge funds and secondly, to ensure the integrity and stability of mark However, the question of the regulation of the hedge fund industry is difficult. it is likely that the introduction of a regulatory framework, reduce fund performance since it depends on the flexibility enjoyed by managers in the choice of instruments, products and financial markets in which they invest. it is clear that the rules imposed on other financial products are not compatible with the flexibility required by alternative strategies. the establishment of a fund regulation onshore fear can also leave to the national authorities, managers of emigration to offshore centers, less restrictive. the result could then be contrary to the objective pursued, highlighting the problems of transparency and control of the risk taken by the managers. consider regulations on speculative transactions, the risk would be to see the market gradually turn to derivatives and other structured products with all the disadvantages that this entails in terms of risk and transparency. since the collapse of LTCM in 1998, many proposals have been studied. however, none of them, not even those suggested by the committee or by Bale and the international organization of securities commissions, have been legislated. However, it is important to keep in mind that the absence of international regulations specific to hedge funds, does not mean that managers are exempt bonds and legal constraints. according to the place of domicile and distribution they choose, hedge funds must comply with a number of rules. American regulation provides, for example, limited access of investors to hedge funds. Only qualified and accredited investors are entitled to their capital. the number of partners may not exceed 99 in the case or at least 65 of them are accredited and 499 if all investors are qualified. however, many hedge funds circumvent these regulatory constraints.

some funds may choose to take up residence in tax havens or jurisdiction is more accommodating and very restrictive. the problem is that if this solution overcomes many regulatory requirements, it does not eliminate the constraints provided with the distribution. Indeed, many countries do not allow offshore funds to freely distribute their share of the national territory. to avoid this stress distribution, some funds will prefer to keep their national presence (onshore) while releasing registration procedures applicable to traditional investment funds. benefit granted by many countries, is generally granted funds agree to waive appeal to the public savings and adopt a legal framework limiting the number of shareholders (limited partnership, limited liability company, closed funds ... ). Despite these exemptions, hedge are indirectly forced to submit to certain rules since their operations involve markets and actors themselves are regulated. as we have just pointed out in the previous section, these special funds that are hedge funds continue to attract an increasing share of investors convinced of the benefits of alternative management. if we stick to speeches by supporters of this type of management, including by fund managers themselves, hedge funds have the ability to deliver a performance "absolute" uncorrelated changing markets. some even go as far as saying that hedge funds have become indispensable in the current context of uncertainty about the market trends. to investor enthusiasm for this type of management, it is important to look at performance and real risk associated with these funds. this analysis seems all the more necessary that managers only provide very little information on the underlying risk of their strategies. as emphasized by the editor of Morningstar France, Frederic Lorenzini, "... it is important not to give in to a fad ..." adding "... we keep in mind that alternative management, like any management, are in danger ...". it is difficult to imagine that these little backbox regulated using complex investment strategies do not pose a risk. This also leads us to wonder about the relevance of indicators that support the investors to make investment decision.

The main objective of this second section is to provide arguments that will make a judgment on the quality of the assessment of hedge funds by market players. a first point focuses on the controversy that surrounds the issue of hedge fund performance and presents the problems of low quality of available data. the second point is designed to attract attention to the level of risk of the underlying hedge funds, including the extreme losses that emphasizes the analysis of their series of profitability. the leptokurtic and asymmetric character of their distributions led to evoke the danger to investors using risk indicators and performance based on the assumption of normality.

performance difficult to understand: hedge funds are often presented as investments with steady performance, regardless of market trends. according to EIM, portfolios of hedge funds have tendency to be resilient in the face of declining markets. proponents of alternative management do not hesitate to highlight this advantage, while the review of studies on the subject tends to moderate about it. Indeed, the

controversial results of the analyzes tend to prove that it is difficult to conclude on the level of performance that actually provides the funds. studies with controversial results: since the late 90s which mark the rapid growth of the hedge fund industry, many works regularly consider the question of the performance of hedge funds. Some studies seek to compare the performance of hedge funds than traditional funds. still others focus on one aspect of the performance of particular interest to investors assessing the persistence of fund performance. but can we really consider that this burst of interest for hedge funds is justified? the regularity of their performance is generally attributed to verify empirically she? the underlying risk of the investment strategies, is properly taken into account in the performance analysis? with regard to very many articles on the subject, it is clear that there is no real consensus answers to conclude on the performance of hedge funds. Indeed, the answer to this question the performance of hedge funds, is subject to considerable controversy within the financial community and academia. while some boast superior performance of hedge funds, while others instead denounce their inability to be better than the traditional asset classes. it is now accepted that historically profitability in absolute terms, is averaged over this and especially during bear market. between January 2000 and February 2002, for example, the index of hedge funds CSFB / Tremont announced an annualized return of 4.6% with a volatility of 7.8% while the S & P 500 on the other hand, an annualized return of -12.26% and volatility of 34.05%. Francois-Xavier Bouis, Director General of the Union Banking Institutional Management (UBI), estimates that hedge funds bullish period recur on average 70% of the overall trend in the market while the downside, they do not follow 30% of the decline. hedge funds would therefore tend to reduce the phenomena of rising and falling markets. However, the conclusion is less obvious when we think in terms of risk-adjusted return. Brown and Goestzman Ibbotoson [1999] show, for example, between 1989 and 1995, the riskadjusted performance of offshore funds has been largely positive. Agarwal and Naik [2000c, 2003] also found that the majority of hedge funds and special funds using funds using leverage effects, generate superior performance to other financial products. the same conclusion was made by Liang [1999, 2001] or Kazemi et al. [2001] which recognize the superiority of the peformance of offshore funds but also funds onshore, compared to mutual funds. Conversely, some works such as Ackerman, McENally and Ravenscraft [1999] or Amin and Kat [2003] estimate that even if they beat the mandatory funds, hedge funds fail to outperform the major indices market in terms of risk-adjusted performance. In addition, Ackerman, McEnally and Ravenscraft [1999] points out that the volatility of hedge fund returns (living and extinct) during the period 1988 and 1995 was much greater than those displayed by the mutual funds and indices market. in the same way, we see that the conclusions of the work concerned with the persistence of hedge fund performance, contradict. before analyzing the main results reported in different studies, it

seems interesting to the main results reported in different studies, it is interesting to explain why the study of the persistence of hedge fund performance is so important for investors. three main arguments can be justified. First, investment in hedge funds is usually done on the basis of their past performance history. investors select funds whose performance is relatively high and stable over time. performance history can then be used to provide an indication of the level of future performance. In this perspective, the persistence measure can be valued as a means of prediction and selection of funds. This evaluation can appear all the more justified the failure rate of funds is much higher in the case of hedge funds than for mutual fund (Brown, Goetzmann and Ibbotson [1999] and Liang [1999]). Moreover, the study of persistence can judge the merits of the fee structure used by the funds. if no persistence in performance is observed, we can consider that the occasional recording good results is the product of chance that a particular skill managers. The question then arises of the relevance of samples expected pay commissions managers the ability to create value. Finally, such an analysis to determine whether the investor has the opportunity to truly enjoy the stability of the performance of a fund. this will be the case when persistence is observed over a period longer than the minimum investment imposed in the fund contract (lock-up period). otherwise, the investor will benefit from the continued performance of the fund to the extent that it is impossible to get out of the fund when he wants. performance history loses its utility as a tool for predicting future performance.

Chapter2: The extreme value theory has been developed to analyze the phenomena it is extreme to say the events that have a low probability of occurrence. Little used in finance, this theory has numerous advantages. it allows particular to estimate the law extrema from which quantile extremes beyond largest observed values can be evaluated. copula is a tool relative innovative modeling structure dependence of multiple random variables. knowledge of probabilistic tool is essential to understanding many application areas of quantitative finance: risk measurement multiple credit products Credit Evaluation structured replication of hedge fund performance, risk measurement of multiple market, portfolio management using Monte Carlo simulation option pricing several underlying, etc.. and, whenever it is necessary to model a dependence structure, we can make use of copulas. a measure of dependence is regularly used linear correlation Pearson's. this indicator is effective when the dependence based on inconsistencies and concordances observed in a sample. dependence between the random variables is well described by their joint distribution. However, we can distinguish the behavior of the marginal distributions of dependence structure: the copula is the tool to extract the dependence structure of a joint distribution and thus separate dependence and marginal behavior. isolating the dependence structure, it is possible to determine a multivariate original law, as composed of different marginal distributions. Consider a simple example. multivariate Gaussian law is actually joining a Gaussian copula and marginal distributions Gaussian but with different marginal distributions for each random variable, the Gaussian copula extraction from the law multivariate same name we can . Dependence measure extreme: tail dependence In this section, we focus on the notion of copula because it is a concept very important for the study of extreme dependence. Copulas have a tool Statistical very interesting because they are interested in and allow multivariate distributions to analyze the probability distribution of the statistical having attached less restrictive, such as leptokurtic distributions, asymmetric. Copulas even allow work on multivariate distributions as they provide break laws multidimensional univariate marginal laws and dependence function. Copulas then give a clear and precise description of the dependence structure between the random variables focusing on marginal distributions. the theorem of Sklar: Sklar's theorem is the fundamental theorem in the theory of copulas: he will allow the connection between the joint density of a random vector and its marginal densities. F is a distribution function ndimensional with marginal distributions F1,.,Fn continuous. There exists a unique n-copula: C:[0,1]n , - such as: F(X1,..,Xn)=C(F1(X1),..,Fn(Xn)) Thus the copula combines the marginal distributions Fi to form a distribution multivariate F, the function can be written as follows and as is the quantile of the distribution function Fi: C(u1,,un) = F( ( ) ( ))

Invariance property: This property makes a robust measure copula function under the assumption that the transformations made on the random variables are strictly increasing. (Schweizer andWolf, 1981). For continuous random variables n X1,.,Xn respective marginal F1,Fn linked by a copuleC, and with h1,.,hn n increasing functions then: . ( ( )) ( ( ))/ ( ( ))

This result shows that the copula invariance is an intrinsic measure of dependence between random variables contrary to the correlation coefficient. The copula separates the dependence structure of multivariate distribution functions to their functions marginal distributions. The concept of tail dependence gives a more relevant on the occurrence of concurrent risk level distribution tails which allows to study the occurrence concomitant extreme values. The tail dependence is a local measure Unlike measures of concordance are measures on the entire distribution. The tail dependence coefficient measures the probability that the active X undergoes a greater loss greater than Xq, Associated quantile q toward zero, conditioned to the achievement of a loss of assets greater Y than Yq associated with the same quantile q. (Joe, 1997). tail dependence: the concept of tail dependence provides a description of the dependency level of the distribution tails, very interesting to study the simultaneous occurrence of extreme values. is a local measure contrary to Kendall's tau and Spearman's rho, which measure the dependence of the entire distribution. coefficients of tail dependence: the dependency coefficient lower tail of two random variables X and Y, the respective distribution functions FX et Fy, is defined by L (x,y)= , ( ) ( )- (if this limit exists). the coefficient of dependency of upper tail of two random variables X and Y, the respective distribution functions FX and FY, is defined by U(X,Y)= , ( ) ( )- (if this limit exists). the notion of survival copula is very useful for the study of tail dependence. the definition is as follows. Definition: survival copula Whether (u1,.,un) the function defined by (u1,,un)= (1-u1,.,1-un) where (u1,.,un)=Pr[U1 u1,.,Un un]. So (u1,,un) is called survival copula of the copula C. definition: X and Y be two random variables with copula C, then we have: L (X,Y)=
( )

and U(X ,Y)=

it is easily shown that the coefficient of tail dependence lower (resp. higher) C is the coefficient of dependency of upper tail (resp. lower) . in other words, from a given copula, it is possible to create another copula dependence structure with a tail reversed we say that X and Y are asymptotically dependent in the upper level of the tail asymptotically independent if and to the upper level of the tail though. when a simple interpretation can be given when considering the concomitant loss of two extreme classes of insurance: accident knowing are Features extreme occurred in a branch, there is a nonzero probability that a loss of a relative intensity comparable occurs simultaneously in the other branch. the notion of survival copula is very useful for the study of tail dependence. the definition is as follows. Definition: survival copula Whether (u1,.,un) the function defined by (u1,,un)= (1-u1,.,1-un) where (u1,.,un)=Pr[U1 u1,.,Un un]. So (u1,,un) is called survival copula of the copula C. definition: X and Y be two random variables with copula C, then we have: L (X,Y)=
( )

and U(X ,Y)=

it is easily shown that the coefficient of tail dependence lower (resp. higher) C is the coefficient of dependency of upper tail (resp. lower) . in other words, from a given copula, it is possible to create another copula dependence structure with a tail reversed.

nonlinear measures of tail dependence: tail index estimation: hill estimator: among the most common estimators, we find the Hill estimator [40] defined in the following way: (
)

with X 1,n ,..X n,n order statistics associated with the sample X 1 ,.,X n. this estimator is very popular, for different reason. First, if there is excessive relative to EJ beyond t, i.e. Ej,t:= , with one can
easily verify that ( ) , when forming the likelihood based on the limiting distribution, we easily checked that the Hill estimator is nothing other than the maximum likelihood estimator in the case where the threshold t= X n-k,n .

second, very attractive side of the Hill estimator is that it is possible to interpret graphically. This is especially important pure practitioners, who often prefer graphical interpretations of mathematical formulas. more precisely, if we consider the graph coordinates. ( ),

commonly called Pareto quantile plot'', in the case of Pareto distribution, this graph is approximately linear in the end points, with a slope . the Hill estimator is then nothing but a naive estimator of the slope and thus . asymptotic properties of the Hill estimator have been established by Mason [52] and Deheuvels et al. [25] for consistency and Beirlant and Teugels [8] and Csorgo et al. [18], among others, for normality. but the main drawback of this estimator is that it is only in the case of a positive sign. different generalizations have been proposed. among them we can mention the moments estimator (Dekkers et al. [26]) or the estimator UH (Beirlant et al. [9]) which will be briefly presented below. Pearsons product-moment correlation: in the statistics, the coefficient of Person is a measure correlation (linear dependence) between two variables X and Y, which gives a value of between 1 and -1 inclusive. it is widely used in science as a measures the strength of linear dependence between two variables. It was developed by Karl Person from a similar idea, but slightly different introduced by Francis Galton in 1880 the Pearson correlation coefficient between two variables is defined as the covariance of two variables, currency by the product of their standard deviations. the form of the definition involves a'' product'' moment, that is, the means (the first moment of origin) product variables average random variation. for population: the Pearson correlation coefficient when applied to a population is usually represented by the Greek letter (rho) and can be called the correlation coefficient of the population. formula is:
( )

for Sample: the Pearson correlation coefficient when applied to a population is usually represented by the letter r and can be called the coefficient of correlation of the sample. ( ( )( ) ( ) )

measures of agreement:

should first recall the notion of consistency. are (x, y) and (x, y) be two realizations of a continuous random vector (x, y), then (x, y) and (x, y) are called concordant if (x-x) (y-y)> 0 and discordant if (x-x) (y-y) <0. theorem: k is a measure of agreement for continuous random variables X and Y. 1/si Y is an increasing function of X, then k (x, y) = 1; 2/Si there is a decreasing function of X, then k (x, y) = -1; 3/Si and are strictly increasing function, then k ((x), (y)) = k (x, y). it is easy to construct examples where the linear correlation coefficient of Pearson is not invariant under strictly increasing transformation (see Embrechts et al. [2001]). therefore, the linear correlation is not a measure of agreement. However, Kendall's tau and spearman rho concordance measures are two well-known statistics. they provide a degree of correlation between the ranks of the observations taken, unlike the linear correlation coefficient that assesses the correlation between the values of observations taken. they also offer the advantage of being expressed simply in terms of the copula copula associated random variable. kendalls rank correlation: are (x, y) be a pair of random vectors and (x ', y') a copy of (x, y), that is to say, a pair of vectors in all respects identical to (x, y), Kendall's tau is then written: ( ) *( )( ) + *( )( ) +

Kendall rate is simply the difference between the probability of concordance and discordance that. in terms of expression copula is: theorem: or (X, Y) be a pair of continuous random variables with copula C, then ( ) ( ) ( ) ( ) ( )

which can be written more (X,Y)=4E(C(U,V))-1, avec U,V

U(0,1).

an estimator of Kendall's tau is constructed from {(x1,y1),...,(xT,yT)} a sample in the following way: ( ) *( )( )+ ( ) {

spearmans rank correlation: are (x, y) and (x, y) two pairs of random vectors copies of a random vector (x, y), then the Spearman rho is: s(X,Y)=3[Pr{X-X) - ) -Pr - ) - )< ].

spearman's rho can be written as a function of the linear correlation coefficient of Pearson: s , )= FX(X),FY(Y)) where Fx and Fy are the respective distribution functions of X and Y. in terms of expression copula is: theorem: or (x, y) be a pair of continuous random variables with copula C, then s(x,y)=12 ( ) ( ) .
T,yT)}

an estimator of spearman rho is constructed from a sample {(x (x, y),, way: ( ) where Ri is the rank of xi,SI if yI and Estimating the tail dependence: ( ( )( ) ( ) )

of (x,y) in the following

There are three main ways to estimate a coefficient of tail dependence. The first, called parametric, based on the assumption that the dependence structure between variables is represented by an Archimedean copula and the limit theorem and Juri Wthrich (2002) to estimate the tail dependence. The second is based on the factor model linking the marginal distributions of the variables, it is called semi-parametric (Malevergne and Sornette, 2004). The third is non-parametric. in this meaning there have been many studies that have tried to introduce nonparametric estimators: Some are based on the empirical estimation of the copula tail (Schmidt et Stadtmller (2006)). Others are based on the transformation of random variables starting Frchet random variables (Poon et al. (2004)). parametric approach: Frahm et al. (2005) have mostly tried not provide an estimate parametric tail dependence, but they also presented approaches parametric based on the degree of information on the distributions of the variables. They presented an estimate via a specific distribution, a copula and specific class copula. This last approach is the most general of the three and is based on the results of Juri and Wthrich (2002) on Archimedean copulas. As part of the estimate, using a class distribution, the authors considered the class of distributions elliptic. But the limitation of this method is that the frame elliptical copula does in the case where the upper and lower tail are equal. While, a priori, investors do not have the same behavior vis--vis losses and gains. However empirical study conducted by Malevegne and Sornette (2004) shows a similar behavior between the positive and negative tails. This argument could enhance the study of tail dependence under the assumption of elliptical distributions. Estimating the tail dependence under the assumption of specific copula was Longin and Solnik introduced by (2001), Malevergne and Sornette (2003), and Patton (2001). But limit of this method is that we must choose the parameters of the copula before ensuring the variables show or not

dependence of tail. As part of the presentation a parametric approach of the tail dependence, we will present the corresponding a more general framework, it uses a copula class, namely the class of Archimedean copulas. The Archimedean copulas have a double advantage: (X, Y) STmkY besides the fact that most of these copulas have an analytic expression, they possible to take into account a wide range of dependency structure. Limit to Archimedean copula which tends established by Juri and Wthrich (2002) to estimate the tail dependence. Considering the following function: Ft(x) =
* ( ( ) )+

La copule associe cette function est ( )

{ ( ) ( ) ( )}

It tends to a Clayton copula when u tends to zero under the assumption that the copula generating function has a to regular variations and thus the coefficient lower tail dependence can be expressed in terms of the parameter of the copula ( )

Semi-parametric approach of the coefficient of tail dependence in the model factor: Malevergne and Sornette (2004) have proposed a new approach that does not directly based on the theory of extreme values but attempts to analyze the structure of extreme dependence from the characteristics of the financial asset model. This choice is relevant because these models are widely used in finance by integrating their analysis yields, interest rates, the credit risk model. The factor model is cavity represented by the model asset pricing (CAPM) (Sharpe(1964), Lintner (1965), Mossin (1966)) or 'arbitrage pricing theory' (APT) (Ross 1976). Considering as an explanatory factor market performance, the authors have tried to characterize the structure of extreme dependence between asset returns and market performance. Indeed, according to some studies, such as Ross (1988), for financial crises (eg crash of 1987), the market index was the only factor explanatory and representative movements of the stock market and the spread of the crisis. The coefficient estimated by a non-parametric or semi-parametric does not require an explicit specification of the dependence structure between assets as in previous studies (Longinus and Solnik, 2001; Malevergne and Sornette, 2003; Patton, 2001). Considering the model of the following factors:

X and Y are two random variables, / is the coefficient of the CAPM. On the assumption that Y has a distribution factor "fast", as the case gamma distributions Gaussian or exponential. In this case the coefficient of dependency tail is zero. This result is evident in the case where Y and the noise factor are normally distributed as in this case, the copula of the joint distribution of (X,Y) has a tail dependence coefficient zero. However, for factors that distribution regular variations such as the

Student t distribution, the distribution is characterized by that noise can not be tailed distribution thicker than the factor for there by ensure tail dependence. Taking as an example the distribution of Student T (v), knowing that the noise factor Y and have the same degree of freedom v, is the scale factor of 0 and that of y is 1par hypothesis. The dependency ratio is then:
( )

with >0

This result is very important because it provides an interpretation of how behaves risk of comovements based on three parameters that define the model factors which allows to quantify the impact of these parameters on the risk measured by the coefficient of tail dependence, thus a close link between the equilibrium model financial assets such extreme risks and multivariate. we note that the coefficient of tail dependence increases when and decreases, which means that the tail dependence decreases when volatility assets increases. We also note that when goes to infinity and > the behind to zero, and if < ,the coefficient tends to 1. This result may seem a little surprising because one would expect that the coefficient tends to zero in all cases, because when goes to infinity, the Student tends to a Gaussian, which characterized by a tail dependence coefficient which is zero. Under the assumption that the factor and the residuals have distributions with laws powerful, it allows to estimate the coefficient of dependence approach parametric. This approach allows a more precise estimate of the ratio of quantiles provided that the shape parameter characterizing the distribution is close to the true distribution. The tail dependence coefficient is then written as follows:this is the scaling factor:
( )

Nonparametric approaches: The first estimator is the one presented by Frahm et al. (2005). They are interested in notion of tail dependence through the concept of copulas which take account for the dependence structure of multivariate distribution functions. for the nonparametric estimation, there is no parametric assumptions about copulas and marginal distribution functions. The coefficient of tail dependence (TDC) is obtained through the empirical copula . The empirical copula is defined by the following relation between the empirical distribution functions , et ( ) { ( ) ( )}

The first form of the TDC is based on the empirical copula was empirical introduced by Coles et al. (1999).This estimator is obtained through the equation (9), and if u C(u,u) is differentiable on the interval (1-,1) then:
( ) ( ) ( )

This gives the coefficient of tail dependence the following form

( ( )

,0<k<m

At that Cm is the empirical copula. It is important to note that the choice of the function empirical distribution of the marginal distributions avoids errors identification due to improper adjustment of the parameters of these distributions. The second form of non-parametric dependency ratio was presented by Joe et al.(1992).
( ( ) )

, 0<k<n9

Indeed, the asymptotic normality and strong consistency of the estimator were discussed in Schmidt and Stadtmller (2006). In this article, the authors also presented the nonparametric function of the tail copula shown in the first party. Estimators and tail dependence are respectively lower in the following equation, this estimator refers to the tail copula already introduced. ( ) ( )

* +

It should be noted that the estimators presented are appropriate for distributions Attachments extreme that they are based on the empirical copula. They have the advantage avoid misidentification of the distribution or the copula which could give false estimation of tail dependence. Une autre approche destimation non paramtrique de la dpendance de queue est celle de Poon et Rockinger (2004) qui consiste en la transformation des variables X et Y en des variables alatoires de Frchet notes par S et T telles que respectivement suivant le rsultat de Ledford et Tawn (1996, 1998). ( ) ( )

Considering the variable Z= min {S,T}, the survival function of L is written as: ( ) ( )

under the assumption that L (z) is a slowly varying function. 0< the Hill estimator. Estimator can be written as follows: = ( ( ))

can be estimated

In the case of the asymptotic dependence = 1 and the degree of dependence is given by > 0. If <1 Then the variables are asymptotically independent and we consider as = 0, and only in cases where we can not reject the fact that = 1 then we estimated through the method of maximum likelihood.

Thus, the estimator is written as: = With is the number of observations of the variable Z which exceeds the threshold u. value high indicates a high exposure to systematic risk, especially during crises.To reduce the systematic risk, a fund manager should invest in funds with a = 0 and <0. More value is small better diversification. The Combining assets that are asymptotically independent reduces the risk of portfolio. Data: we choose to conduct our study on hedge fund indices proposed by the data provider CSFB / TREMONT. we have the historical returns of the 13 monthly indices divided into two categories: a comprehensive index of all hedge funds strategies, and a set of sub-indices representing 12 categories of hedge funds expressed in monthly frequency and the base 100 . these data are extracted from the TASS includes approximately 2600 funds and are commonly used in empirical studies. by Fung and Hsieh (2000), these indices are less affected by survivorship bias that individual fund data. Unlike other indices, the indices of CSFB / Trenont take into account the net profitability of the commission weighted by the size of the funds in this basket fund. to characterize the market share, we will use the international equity index SP500. statistical study indices CSFB / Tremont, is conducted over the period January 1994 to December 2004, ie about 132 monthly. this period appears particularly interesting in that it includes different market conditions including the collapse of prices following the Asian crisis. SP500 index is a composite index weighted by capitalization of 500 shares of U.S. companies of medium and large size Selected for their representativeness of the U.S. economy. To circumvent the problem of access to individual fund returns, one solution is to use companies that specialize in collecting information on hedge funds. This raises the question of the choice of data provider. This decision is crucial because, according to Liang [2000, 2003b], it determines the representation that can be the alternate universe. Comparing the two large databases HFR and TASS Liang [2000] points out, for example, that significant differences exist between returns, the net value of assets under management, commissions paid to managers or yet the style strategies of 465 funds. Similarly, Brown, Goetzmann and Park [1997] Amenc and Martellini [2002] and Fung and Hsieh [2001] point out that the various databases and their underlying indices, would provide a highcontrast image performance of the hedge fund industry. This finding may be explained in part by the diversity that exists between the methods index construction implemented by different data vendors. It may be noted that such indices CSFB / Tremont take into account the weight capitalization funds in the composition of the indices, while the other indices are constructed on the principle of equal weighting. The rate of change of the composition of the indices, is also on the level of performance displayed. HFR indices are rebalanced monthly (strategy contrarian: horizon of a few weeks) while the indices CSFB / Tremont are quarterly

basis (momentum logic: conservative approach). According to Fung and Hsieh [2001] Through this "rebalancing" (rebalancing scheme bias) explain alone the 7.4% deviation of returns observed in 1999 between the two bases.Therefore, we can consider that the choice of indices can affect the outcome performance studies. More generally, we consider that the databases of hedge funds suffer many biases that would cause an overestimation of the actual level of performance of alternative strategies. The four main ones through surviving through selfreporting, through backfilling and selection bias Bias says "Survivor" (Survivorship bias) was the one that gave rise to largest number of studies. Can be mentioned, for example, the work of Ackermann, McEnally and Ravenscraft [1999] Brown, Goetzmann and Ibbotson [1999], Brown and Goetzmann Park [1999], Fung and Hsieh [1998, 2000], Kazemi, Martin and Schneeweis [2001], Liang [2000;2001] and Amin and Kat [2001, 2003] and Bares, Gibson and Gyger [2003].Through surviving funds only appears when recording a performance better than average, or at least those who survived, are present in the database. It means that funds that have disappeared over a year, are not taken into account in the calculation of profitability indices. According to Amin and Kat [2001], through surviving overestimate the average hedge fund returns of 2% per year, reaching 4-6% even for the youngest and shallow. For their part, Fung and Hsieh [1998, 2000] and Brown, Goetzmann and Park [1999] have estimated at between 3% and 1.5% per year. In the same way that Liang [2000], Kazemi, Martin and Schneeweis [2001] estimate that the impact of this bias depends on the strategy and the period. Their results show that it would be between 0.2% and 3.9% per year its influence is relatively low among strategies event ("Event") in compared to strategies based on the exchange rate.It is also important to note that this bias affects not only the average returns but also the volatility, skewness and kurtosis associated. Amin and Kat [2003] estimate that leads to an underestimation (downward bias) and the volatility kurtosis and overestimation (upward bias) of skewness. Insofar as the rate of clearance of funds during the first year activity remains relatively high (Liang[2000] Amenc and Martellini [2002]), this bias is significant. - The second bias present in the databases of hedge funds is that of self reporting. This is the freedom that the funds for the publication of their results is at the origin. The fund, which considers its unsatisfactory results or the which reached its critical size (and therefore no longer need advertising), has the ability to refuse or discontinue the publication of its results. These will not be taken into account in the construction of the indices. Depending on the profile of the fund returns question, we can observe a positive or negative effect on the profitability index profile. The disadvantage of this is that through its impact on performance is almost impossible to evaluated. - A third bias is that of backfilling. It occurs when the introduction of a new funds in a database involves the insertion of its historical returns.Insofar as this process usually occurs after registration goodresults, the past performance of hedge fund indices, is therefore generally found in increased. This is still a source of overestimation of the performance indices hedge funds. To minimize this bias, some data providers are choosing not to introduce the results of a funds only from its insertion into the database. - Finally, the hedge fund databases are also influenced by a bias that called selection (selection bias). It is the result of choices made by data providers compositional clues. In fact, each oven supplier built

its indices on the basis of a more or less important that funds selected on the basis of several criteria more or less arbitrary.