# kaal:claim:2470008-005

**Claim.** The systemic risk of hedge funds arises principally from the combination of aggressive investment strategies and high leverage with adverse price movements that can dry up credit and depress the market price of collateral.

**Type.** mechanism  **Support.** argued

**Holds when.**

- hedge funds employing leverage
- periods of adverse market price fluctuations

**Source quote.**

> Hedge funds' systemic risk is mainly the result of their pursuit of aggressive investment strategies and a significant level of leverage in combination with adverse fluctuations in market prices that can dry up credit and negatively affect the market price of collateral.

**From.** Wulf A. Kaal, *The Systemic Risk of Private Funds after the Dodd-Frank Act* (2014), II. Systemic Risk of Private Funds

**Cite as.** Wulf A. Kaal, The Systemic Risk of Private Funds after the Dodd-Frank Act (2014). SSRN: https://ssrn.com/abstract=2470008

**Verify.** sha256 of source PDF `5f68a401c935527d89658171e9b48a4d186710459aaf2bdbead755507394e8c9` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20-%202014%20-%20The%20Systemic%20Risk%20of%20Private%20Funds%20after%20the%20Dodd-Frank%20Act.pdf

**Topics.** private-funds, systemic-risk, risk-and-incentives, economics

**Keywords.** hedge-funds, leverage, collateral, systemic-risk, credit-markets

**Superseded by.** A later claim revises this one. Prefer quoting: https://wulfkaal.github.io/claims/2748096-020, https://wulfkaal.github.io/claims/2748096-039

**Related claims.**

- extended_by: https://wulfkaal.github.io/claims/2748096-008
- extended_by: https://wulfkaal.github.io/claims/3405660-033
- supported_by: https://wulfkaal.github.io/claims/2748096-002

**Canonical form.** This markdown file is the canonical hashed representation of the claim. Its sha256 is the content hash used for attestation.