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ost attain 60% of assets management share of hedge funds. In order to seize more market share, other brokers must provide service having many discounts, which means there are larger risk association between brokers and hedge funds (Morrison, 2005). At the same time, a lot of large financial institutions are the main transaction object of hedge funds, such as through the OTC and financial derivatives.

Hedge funds also participate in the secondary market through bank loans, such as high-yield bonds, convertible bonds and emerging market bonds, etc. and this means that banks and hedge funds faced a similar risk. The failure a large hedge fund of will lead to huge reaction of relevant banks and financial markets and cause system crisis (Aglietta and Rigot, 2008). The initiative attack of hedge funds on the financial market also can lead to the instability of the financial system and this kind of instability and will strengthen with the vicious cycle of different channel. For example, when hedge funds and bank proprietary business which have the similar position at the same time on a large scale are out of a market, it will cause market risk. Because hedge funds behavior’s centralization, relevance and overflow, it will further lead to financial system of systemic risk.

The rapid expansion scale of hedge funds makes the investment mistakes and has to clearance in the process of delivery. It will inevitably affect the interests of other investors, what’s more, large hedge funds’ a large number of borrowings from bank even more expanded the externality. Once the hedge fund bankruptcy, the interests of the depositors will undoubtedly damage. Even though most hedge funds business performance is good, the risk status moderate. But as long as there is a hedge fund with huge losses, its disastrous consequence is unimaginable (Greenspan, Alan，1998).

Hedge funds make the whole financial as an integration of market, bring the whole market about an advantageous side. It appears as a positive market participant, is good for expansion of OTC market development and ascension of liquidity and improves the distribution of risk. Because the diversification of hedge funds’ investment strategy and the low correlation among hedge fund investment style, it can provide attractive income at the procession of stock bonds market going up and the overall market risk is low compared with mutual funds.

4.0 Hedge funds’ impact on the economy

From the operating principle of hedge funds, it should be the stability of financial market rather than destroyer of financial stability, because hedge operation of hedge funds promotes the market to a balanced state of regression. However, in actual operation, hedge funds tend to diverge from its original definition. It manifests in the following two aspects:

First of all, although hedge funds conventional operation technique is hedge mechanism of the sale combination. But sometimes carry out unilateral operation instead of hedge. That is to say, hedge funds can do empty or do much without any corresponding hedge assets. When the hedge fund from the main evade risk mechanism evolved to the organization to manipulate the price of speculation, its nature changed, dis本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。