Hedge Funds Research Paper

Hedge Funds Research Paper-72
This reflects a misunderstanding of the real mode of operation of hedge funds and their impact on the economy.

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Typically, a financial institution is a provider of liquidity, issuing liquid liabilities to hold less liquid assets, using its capital to cover the liquidity risk and take a ride on the provision of liquidity is justification cost of capital employed.

The second concept, "market liquidity" refers to the ability to make transactions in order to adjust portfolios and risk profiles without disturbing the underlying price.

So, although they are considered the most risqu�set funds are also considered an innovation in the market; hedge funds have helped to ensure financial market stability.

In this chapter we will deal with hedge funds as stabilizing the financial market by presenting their contributions that have allowed this stability. Basically, liquidity is the ease with which the value can be realized on assets.

" Ie that the prevalence of a financial system that is able to ensure a sustainable manner, and without major disruptions, an efficient allocation of savings to investment opportunities.

Indeed, this contribution is measured by injecting liquidity in large volumes, the price discovery and spread of risk that enhance the efficiency of financial markets and here we talk about hedge funds as a stabilizer system Financial.The dimensions of market liquidity are: � market "depth", or the ability to execute large transactions without influencing prices. � "Immediacy" or the speed with which transactions can be executed.� "Resilience", or the speed with which the underlying price are restored after a disturbance (Crockett 2008).To increase profitability while reducing risk exposure in the market, Mr.Jones took the positions of both buyer and seller, and had recourse to the leverage to increase the performance of the securities.These funds often require high minimum investments and access is limited.They are particularly aimed at wealthy clients, whether private or institutional.Estimates of Hedge Fund Research (HFR), from 610 funds managing $ 39 billion in assets in 1990, they had risen to 3,873 and funds managed $ 490 billion ten years later. funds, 325 billion are managed in Europe and 115 billion in Asia (Ferguson and Laster, 2007).At the end of the third quarter of 2006, 9,228 funds managed some 1 400 billion, representing an annualized growth of their assets by 19% since 2000. Based on these impressive results can not be removed is a simple conclusion is that hedge funds play a large role in economic growth, and their profitability can be classified as a stabilizing factor of the financial system But what is meant by financial stability? the prevalence of a Financial System Able to Ensure Which is in a lasting way, and without major disruptions, an efficient allocation of savings to Investment Opportunities.The positive roles that they attribute are relatively well identified.Thus it is accepted to participate, by the discovery of good equilibrium prices, greater market efficiency, they contribute importantly to provide liquidity, and finally they have developed the Credit derivatives allowing better risk sharing. But hedge funds vary greatly in size and their strategies. The many improvements in market practice and supervision have allayed concerns about stability, but the increasing complexity of products and markets creates new challenges (Draghi 2007).


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