| In 1990s,hedge fund like an unseen "ghost" hounded in the international financial market In 1992 hedge fund attacked pound ,leading to "Bound Crisis". In 1997, it patronized Thailand, making babt heavily devalued .And this initiated the financial crisis of southeast Asia .In August of 1998 it checked Hongkong dollars leading to the breaking out of an earth-shaking defensive war of Hongkong finance. In September of 1998 LTCM affair broke out, which was seriously enough to affect the whole international financial system.In fact, hedge fund, this secret "ghost", is just a product of the unification of world economy and the constant innovation derivation financial instrument. Its existence and operation is the internal necessity of lowering market risk whole raising efficiency of highly marketing economy. And it has historical necessity.Hedge fund is actually a kind of personal investment fund similar to mutual fund. It provides the investors of participants fund an opportunity of obtaining above quota repay under the condition which is higher than average market risk . The operating methods of hedge fund are various: they may be merchandise on hand ,futures, short buying or short selling. Its investment combination is also various, including securities, money, fund, option. interest rate , exchange rate, all sorts of financial derivative instruments and almost all financial products such as bond and creditors' rights .The theoretical basis of hedge fund is the firm maintaining of "market failure" in financial market and the necessary tendency of "market failure" to "normality". Its working mechanism is to make use of the internal reciprocal relation of logical connection of mathematics mode which is similar to function corresponding, among different prices of financial markets, to fully give free rein to lever effect and the panic psychological effect led by the great alteration of prices, to quickly alter prices of a certain financial market such as foreign exchange markets in a short period , thereby leading to corresponding change of another financial market such as , money market, to make prices in foreign exchange markets, money markets, capital markets and even gold markets produce mutual effect at different time and space , and at last it can achieve the target of obtaining huge profit. Doubtless that the interconnecting mutual effect caused by the operation of hedge fund, may also imply enormous risk.IIIThree classical cases of hedge fund has been selected to illustrate operating mechanism in detail and the immense effect brought by hedge fund on international politics and economy and international financial system.Hedge fund lashed pound, leading to "Pound Crisis" . And it is a very successful operation. In this way it not only brought huge profit, but also made pound quit from European monetary exchange rate mechanism, bringing enormous uncertainty to European monetary system and produced far-reaching effect on international economy and the unification course of European economy.Hedge fund checked Hongkong stock and Hongkong linking exchange rate, leading to a great defensive war of the finance of Hongkong. On account of the intervention of Hongkong government into markets, the operation of hedge fund didn't achieve anticipating success, and brought triggered the dispute that Hongkong government violated "Free-market economy theory" and the query of "the three principles" of the markets of Hongkong. The three principles are fairness, justice and publicity. But, Hongkong government struggled back at the most vital moment of "Southeast Asia Financial Crisis" , discovered the relationship between stock market and money checking. This act made a great devotion to the puzzle of effective supervision, of the world-wide floating capital's troubling the whole world's capital market and the stability of international economy.The famous American hedge fund----Long-Term Capital Management Fund was is heavy losses, facing bankruptcy and had to turn to government for help. It...
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