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The concept of the gamma of a financed return as the highest level of stress that a return distribution can withstand is introduced. Stress is measured by positive expectation under a concave distortion of the return distribution accessed. Four distortions introduced in Cherny and Madan (2008) are employed in studying the distribution of returns available in the hedge fund universe. It is shown that the skewness, peakedness and tailweightedness of the standardized investment return significantly affects the Sharpe ratios required to reach a target gamma level.
Eberlein et al. (Fri,) studied this question.