Monday, April 14, 2014

Why Hedge Funds Are The Greatest Source Of Risk In Financial Markets In Bad Times

This study by the Federal Reserve Bank Of San Francisco explains why hedge funds are a greater source of systemic risk in a financial industry that consists of commercial banks, investment banks, insurance companies and hedge funds.  The study found that spillovers from problems in hedge funds affect the entire financial system.  There are fewer spillover effects in the system between the other participants in the financial industry.  Hedge funds are less regulated that the other industry participants and there is less public information about their operations.

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