Hedge funds and their impact on financial stability. Implications for systemic risk and how to control for it

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The thesis explores the evolving role of hedge funds within the financial system, highlighting their dual reputation as both beneficial and potentially destabilizing entities. While hedge funds have contributed to market efficiency and risk diversification, concerns persist regarding their capacity to create systemic risk, as illustrated by the Long Term Capital Management crisis. The paper aims to provide a comprehensive understanding of the hedge fund industry, analyzing its advantages and the inherent threats it poses to financial stability through a detailed four-part structure.