Abstract
cording to the adjustment of “Offshore Funds Regulation”, the percentages of derivatives holdings to fund net value have been risen from 15% to 40%. This policy not only increased the variety of managers’ strategies, but also increased the risks. As we focusing on the risk of portfolios, consist of stocks and derivatives, we notice that if the payoff of derivatives is nonlinear, the distribution of returns will be extreme asymmetric. Under this condition, the traditional VaR is not enough to present the concept of risk, so we bring the downside risk into consideration. Then, since the deltas of derivatives are changing over time, there are some chances that the holdings will exceed the regulation so we need to do the dynamic adjustment. Here we use LPMD to test the effects under different adjusted frequencies. The final part is the empirical analysis and this part is divided into three parts. We discuss about the VaR, downside risk and the difference between offshore funds and foreign funds.