Efficient identification and signatures for smart cards
CRYPTO '89 Proceedings on Advances in cryptology
Random oracles are practical: a paradigm for designing efficient protocols
CCS '93 Proceedings of the 1st ACM conference on Computer and communications security
Communications of the ACM
Gradual and Verifiable Release of a Secret
CRYPTO '87 A Conference on the Theory and Applications of Cryptographic Techniques on Advances in Cryptology
Proofs of Partial Knowledge and Simplified Design of Witness Hiding Protocols
CRYPTO '94 Proceedings of the 14th Annual International Cryptology Conference on Advances in Cryptology
Guaranteed Correct Sharing of Integer Factorization with Off-Line Shareholders
PKC '98 Proceedings of the First International Workshop on Practice and Theory in Public Key Cryptography: Public Key Cryptography
Security proofs for signature schemes
EUROCRYPT'96 Proceedings of the 15th annual international conference on Theory and application of cryptographic techniques
A threshold cryptosystem without a trusted party
EUROCRYPT'91 Proceedings of the 10th annual international conference on Theory and application of cryptographic techniques
Efficient proofs that a committed number lies in an interval
EUROCRYPT'00 Proceedings of the 19th international conference on Theory and application of cryptographic techniques
Practical Zero-Knowledge Proofs for Circuit Evaluation
Cryptography and Coding '09 Proceedings of the 12th IMA International Conference on Cryptography and Coding
Cryptographic securities exchanges
FC'07/USEC'07 Proceedings of the 11th International Conference on Financial cryptography and 1st International conference on Usable Security
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This work introduces a new tool for a fund manager to verifiably communicate portfolio risk characteristics to an investor. We address the classic dilemma: How can an investor and fund manager build trust when the two party’s interests are not aligned? In addition to high returns, a savvy investor would like a fund’s composition to reflect his own risk preferences. Hedge funds, on the other hand, seek high returns (and commissions) by exploiting arbitrage opportunities and keeping them secret. The nature and amount of risk present in these highly secretive portfolios and hedging strategies are certainly not transparent to the investor. This work describes how to apply standard tools of cryptographic commitments and zero-knowledge proofs, to financial engineering. The idea is to have the fund manager describe the portfolio contents indirectly by specifying the asset quantities with cryptographic commitments. Without de-committing the portfolio composition, the manager can use zero knowledge proofs to reveal chosen features to investors – such as the portfolio’s approximate sector allocation, risk factor sensitivities, or its future value under a hypothetical scenario. The investor can verify that the revealed portfolio features are consistent with the committed portfolio, thus obtaining strong assurance of their correctness – any dishonest portfolio commitment would later serve as clear-cut evidence of fraud. The result is a closer alignment of the manager’s and investor’s interests: the investor can monitor the fund’s risk characteristics, and the fund manager can proceed without leaking the exact security composition to competitors.