# kaal:claim:2748096-018

**Claim.** Market-neutral arbitrage strategies implicitly minimize systemic risk, because funds using them construct returns that do not depend on the direction of the market.

**Type.** mechanism  **Support.** asserted

**Holds when.**

- applies only to funds running some form of market-neutral arbitrage

**Source quote.**

> However, because many hedge funds engage in some form of market-neutral arbitrage to ensure that returns do not depend on the direction of the market, they may implicitly minimize systemic risk.

**From.** Wulf A. Kaal, Timothy A. Krause, *Hedge Funds and Systemic Risk* (2016), Risk-Management Incentives, page 7

**Cite as.** Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016). SSRN: https://ssrn.com/abstract=2748096

**Verify.** sha256 of source PDF `8f30260f2c1db728b45c4f3b9b7c64358cf9d3217277bc3c63a910c32f87b508` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20and%20Krause%20-%202016%20-%20Hedge%20Funds%20and%20Systemic%20Risk.pdf

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

**Keywords.** market-neutral, arbitrage, systemic-risk-mitigation, investment-strategy

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