Hedge Fund, for example, in a basic hedging operation. After buying a stock, the fund manager also buys a Put Option with a certain price and timeliness. The utility of put option is that when the stock price falls below the price limited by the option, the holder of seller option can sell the stock in his hand at the price limited by the option, thus hedging the risk of stock falling. For another example, in another kind of hedging operation, the fund manager first selects a certain kind of bullish industry, buys a few good stocks in this industry, and sells a few poor stocks in this industry at a certain ratio. As a result of this combination, if the industry is expected to perform well, the increase of high-quality stocks will definitely exceed that of other inferior stocks in the same industry, and the gains from buying high-quality stocks will be greater than the losses caused by short selling inferior stocks; If the expectation is wrong, the stocks in this industry will fall instead of rising, then the decline of inferior stocks will be greater than that of high-quality stocks, and the profit from short selling will be higher than the loss caused by the decline of buying high-quality stocks. Because of this operation method, the early hedge fund can be said to be a form of fund management based on the conservative investment strategy of hedging and preserving value. After decades of evolution, hedge funds have lost their original connotation of risk hedging, and the title of Hedge Fund is also in name only. Hedge fund has become synonymous with a new investment model, that is, based on the latest investment theory and extremely complex financial market operation skills, making full use of the leverage of various financial derivatives, taking high risks and pursuing high returns. The characteristics of Hedge Funds have evolved for decades, and hedge funds have lost their original connotation of risk hedging, and the title of hedge fund is also in name only. Hedge fund has become synonymous with a new investment model. That is, based on the latest investment theory and extremely complicated financial market operation skills, we should make full use of the leverage of various financial derivatives and take high risks. Pursuing a high-yield investment model. The current hedge funds have the following characteristics: (1) The complexity of investment activities. In recent years, all kinds of financial derivatives, such as futures, options and swaps, which have become increasingly complex and innovative, have gradually become the main operating tools of hedge funds. These derivatives were originally designed to hedge risks, but because of their low cost, high risk and high return, they have become effective tools for many modern hedge funds to speculate. Hedge funds match these financial instruments with complex combinations, invest according to market forecasts, and obtain excess profits when the forecasts are accurate, or use the imbalance generated by short-term midfield fluctuations to design investment strategies to obtain the price difference when the market returns to normal. (2) The investment effect is highly leveraged. Typical hedge funds often use bank credit to Leveradge several times or even dozens of times their original funds to expand their investment funds, so as to achieve the goal of maximizing returns. The high liquidity of the securities assets of hedge funds makes it convenient for hedge funds to use the fund assets for mortgage loans. A hedge fund with a capital of only $1 million can lend billions of dollars by repeatedly mortgaging its securities assets. The existence of this effect makes the net profit after deducting the loan interest after a transaction far greater than the possible income from using only $1 million in capital operation. Similarly, precisely because of the leverage effect, hedge funds often face the huge risk of excessive losses when they are not operated properly. (3) Private placement of financing methods. The organizational structure of hedge funds is generally a partnership system. Fund investors join in with funds and provide most of the funds but do not participate in investment activities; Fund managers join in with capital and skills and are responsible for the investment decision of the fund. Because hedge funds require a high degree of concealment and flexibility in operation, the number of partners of hedge funds in the United States is generally controlled below 1, and the capital contribution of each partner is more than 1 million US dollars. Because hedge funds are mostly private, it circumvents the strict requirements of American law on Public Offering of Fund's information disclosure. Due to the high risk and complex investment mechanism of hedge funds, many western countries prohibit them from publicly recruiting funds from the public to protect the interests of ordinary investors. In order to avoid the high taxes in the United States and the supervision of the US Securities and Exchange Commission, hedge funds operating in the US market generally register offshore in some areas with low taxes and loose control, such as Bahamas and Bermuda, and are limited to raising funds from investors outside the United States. (4) The concealment and flexibility of operation. Hedge funds and securities investment funds for ordinary investors not only have great differences in fund investors, fund raising methods, information disclosure requirements and degree of supervision. There are also many differences in the fairness and flexibility of investment activities. Securities investment funds generally have a clear definition of portfolio. That is to say, there is a definite plan in the choice and proportion of investment tools. For example, a balanced fund refers to the fact that stocks and bonds are roughly evenly divided in the fund portfolio, and a growth fund refers to the investment focusing on high-growth stocks; At the same time, * * * mutual funds are not allowed to use credit funds for investment, while hedge funds are completely free from these restrictions and definitions. They can use all operational financial tools and combinations to maximize the use of credit funds in order to obtain excess returns higher than the average market profit. Due to the high degree of concealment and flexibility in operation and the leverage financing effect, hedge funds play an important role in the speculative activities in the modern international financial market. In the initial hedging operation, fund managers buy a certain price and Put Option of this stock at the same time. The utility of put option is that when the stock price falls below the price limited by the option, the holder of seller option can sell the stock in his hand at the price limited by the option, thus hedging the risk of stock falling. In another kind of hedging operation, the fund manager first selects a certain kind of bullish industry, buys several high-quality stocks in this industry, and sells several inferior stocks in this industry at a certain ratio. As a result of this combination, if the industry is expected to perform well, the increase of high-quality stocks will exceed that of other stocks in the same industry, and the gain from buying high-quality stocks will be greater than the loss from short selling inferior stocks; If the expectation is wrong, the stocks of this industry will fall instead of rising, then the decline of the stocks of poor companies will be greater than that of high-quality stocks, and the profit from short selling will be higher than the loss caused by the decline of buying high-quality stocks. It is precisely because of this operation method that the early hedge funds were used as a conservative investment strategy of fund management. However, with the passage of time, people's understanding of the role of financial derivatives has gradually deepened. In recent years, hedge funds have been favored because of their ability to make money in a bear market. From 1999 to 22, ordinary public funds lost an average of 11.7% a year, while hedge funds gained 11.2% a year during the same period. There is a reason why hedge funds have achieved such impressive results, and the benefits they get are not as easy as the outside world understands. Almost all hedge fund managers are excellent financial brokers. Financial derivatives (taking options as an example) have three characteristics: first, they can leverage a larger transaction with less funds, and people magnify it by 2 to 1 times; When the transaction volume of this transaction is large enough, it can affect the price; Second, according to Lorenz? 6? 1 Glitz's point of view, because the buyer of an option contract has only rights but no obligations, that is, at the delivery date, if the Strikeprice of the option is not favorable to the option holder, the holder may not perform it. This arrangement reduces the risk of option buyers and at the same time induces people to make more risky investments (that is, speculation); Third, according to John Hull, the more the exercise price of the option deviates from the spot price of the underlying asset (specific subject matter) of the option, the lower its own price, which brings convenience to the subsequent speculative activities of hedge funds. After hedge fund managers discovered the above characteristics of financial derivatives, the hedge funds they mastered began to change their investment strategies. They changed the investment strategy of hedging transactions into manipulating several related financial markets through a large number of transactions and profiting from their price changes.