What are your thoughts as to the relative benefits and costs of additional regulation for hedge funds
Each question should be a 2 -3 paragraphs long.
1.
There has been a lot of controversy regarding the regulation of hedge funds and mutual funds. Hedge funds have been lightly regulated in the past and some feel that they require more supervision. Others believe that more regulation would unduly constrain them, potentially reducing their substantial returns realized in the past. What are your thoughts as to the relative benefits and costs of additional regulation for hedge funds?
2.
Is safe investing possible, and if yes, how can you accomplish it? The assumption that we usually hear is that investing means taking risks. The investing theory states that the higher the risk of your investments, the higher the expected return. How can the investment be safer? What are some of the strategies, financial instruments, and tools that you can use to make safe investments (if at all possible)?
3.
Technical Analysis is becoming more mainstream alongside with fundamental analysis. Besides the CFA (Chartered Financial Analyst) designation, the CMT (Chartered Market Technician) designation was developed to equip traders and investors with the skills to perform technical analysis. Comment on the relevance and importance of technical analysis and how behavioral finance may affect the charts that are used as basis to generate “buy” and “sell” trading signals.
4.
The recent trends in high frequency trading (sometimes called algorithmic trading) using sophisticated computer models have significantly increased the trading volume and the volatility of the stock market. Comment on the pros and cons to high frequency trading, i.e. is adding volatility justified by adding liquidity; does the fast-paced trading put the “other” participants in the market at a disadvantage, and if yes, how? Comment on “flash orders” and the legality of these orders.
5.
Investors hang on every word spoken (or not spoken) by the Federal Reserve Chair regarding interest rates. The Fed announced that it would be more open in discussing its outlook for the economy and how that outlook will direct monetary policy. In your opinion,
a. Is greater openness by the Fed a good or a bad thing, given that the market may over-react to any statements from the Fed?
b. How should the Fed balance the concerns regarding recession and inflation?
6.
Many people believe that the growing use of options and other financial derivatives is a huge benefit to the marketplace, improving efficiency and diversifying risk amongst a much wider group of investors. Others believe that derivatives are highly risky, that most parties which deal in derivatives don’t understand the underlying risks and as a result the overall amount of risk being accepted by our financial markets is much larger than anyone really appreciates. Yet others (and there obviously can be some overlap), believe that some derivative instruments (like credit default swaps) increase the likelihood of a company or country defaulting since they provide incentives to market participants to encourage defaults or bankruptcies. What are your thoughts?
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