What is the role of securities firms, such as hedge funds, in the process of financial intermediation? How serious a threat do the international activities of mostly unregulated hedge funds pose to financial stability?
The role of security firms is to buy securities and hope the value will increase in the future. Hedge funds are stocks that will increase in value in the future
Hedge funds are usually highly regulated by the government and the funds are easily tracked through bank examinations.
Unregulated hedge funds pose a huge threat to financial stability when the government cannot regulate them. As a result, there is no insurance of these funds by the government.