Hedge Funds and Financial Markets Term Paper by Alexander the Great

Hedge Funds and Financial Markets
An analysis of the role of hedge funds in the financial markets and an explanation of their importance as clients of investment banks.
# 98571 | 2,105 words | 8 sources | MLA | 2007 | GB
Published on Oct 03, 2007 in Business (Finance, Investment and Banking)

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This paper outlines the main characteristics of hedge funds and looks at how these differ from traditional investment funds. There are over a dozen investment techniques used in hedge fund industry in order to make returns. The paper describes four of them: opportunistic, market neutral - securities hedging, global macro and value investment style. The great size of the assets under management of the hedge fund suggests that they are important clients of investment banks and can play a significant role in the financial markets. The paper also takes a closer look at how investment banks work with hedge funds and what impact the hedge funds have on the overall stability of the financial markets.

An Overview of Hedge Funds, Comparison to Traditional Funds and Their Importance as Clients of Investment Banks
Recent Expansion of Hedge Funds
Hedge Funds and Financial Stability
Some Risks Associated With Hedge Funds
Regulation of Hedge Funds
Hedge Funds' Investment Styles

From the Paper:

"The definition of a hedge fund is an investment institution, which actively manages its portfolio using a large number of strategies and leverage in order to produce high returns, which are measured in absolute terms and/or over a specified benchmark, such as FTSE100 in the UK or the DOW30 in the US. Hedge funds are similar to the traditional investment funds in that they are both pooled and professionally managed, however, there is a number of differences. Unlike traditional funds HFs are practically unregulated and have the flexibility in their trading and investment strategies, e.g. go short when markets are bearish or when a manager thinks that an asset is overpriced and is due a correction (source: Investopedia)."

Sample of Sources Used:

  • Bank of England (2007) Financial Stability Report, April 2007, Issue No. 21
  • Gieve J. (2006) "Hedge Funds and Financial Stability", Bank of England Quarterly Bulletin, 2006 Q4, pp.447-451
  • Lhabitant F. S. (2004) "Hedge Funds Investing: A Quantitative Look Inside the Black Box", EDHEC Risk and Asset Management Research Centre, April, 2004
  • Pilbeam, K. (2005), Finance and Financial Markets, 2nd edition, Hampshire, Palgrave Macmillan
  • Bloomberg, <http://www.bloomberg.com/economy> [accessed on 28.04.2007]

Cite this Term Paper:

APA Format

Hedge Funds and Financial Markets (2007, October 03) Retrieved March 03, 2024, from https://www.academon.com/term-paper/hedge-funds-and-financial-markets-98571/

MLA Format

"Hedge Funds and Financial Markets" 03 October 2007. Web. 03 March. 2024. <https://www.academon.com/term-paper/hedge-funds-and-financial-markets-98571/>