advantages and risks hedge funds as a group can convey – once again being aware that this is an extremely heterogeneous group. in my opinion, hedge funds fulfil several useful functions in the financial markets. they contribute to spreading market risk and credit risk to more agents. further, since they can act swiftly and in a flexible manner, they can often help improve the pricing for different products. for example, hedge funds that specialise in identifying mispriced assets contribute to prices that better reflect the underlying risk. when the prices are more correct, resources may also be distributed more efficiently and the risks may be better managed. in new and complex markets hedge funds are often important agents with the opportunity and will to take on risk. this, in turn, improves liquidity in these markets. according to the barclay hedge database. see also the ecb financial stability review 2007 : 2. but there is often little insight but the flexibility hedge funds have also entails risk. problems that arise in a hedge fund can spread to the fund ’ s counterparties ; in the first instance the major banks. what is often highlighted in this context is the hedge funds ’ high leverage. high leverage of course increases the risks, and the effects of a fund failing. hedge funds are often accused of showing herd behaviour, that is, of imitating one another's behaviour and taking similar positions. but i find it difficult to believe that hedge funds to a greater extent than other investors just follow the prevailing trend. the fact that the required rate of return is absolute rather than relative in most hedge funds should actually indicate the opposite. another source of concern is that there is little public insight into hedge funds ’ activities. to take one example, in the united states hedge funds do not need to publicly report their activities or even register them. this means that major risks can arise without either counterparties or authorities being aware of this. two well - publicised cases in this context are the ltcm and amaranth hedge funds. both of the funds collapsed and the lack of insight appears to have contributed to the problems. ltcm was permitted a very high degree of leverage by its counterparties, which is remarkable and reflects the fact that there was no overview of the fund ’ s size and total risk. in the same way, no one observed in time the risks on the energy market that were being built up in the amaranth hedge fund. the funds ’ high leverage and lack of transparency has contributed to a

of banknotes, coins and use of cash and cards ”, december 2006. a study of data from 2002 conducted by the riksbank revealed that each cash payment cost society an average of sek 4. 6, while each card payment cost sek 3. 0. the costs associated with the use of cash included not only the handling and transport costs of the banks and shops but also an estimate of the time consumers spent on fetching and taking care of the cash. the variable costs are considerable, that is it costs more to handle a large sum than a small sum. cash has to be counted, transported and stored. this is not the case with cards. there are major fixed costs in the form of an infrastructure that includes terminals and communication lines, but the variable costs are small. it is not more expensive to handle a card payment of sek 50 000 than a payment of sek 50. from this it was possible to calculate that, in 2002, it cost society less when payments were made using cash providing that the sum involved was less than approximately sek 70. for sums higher than this it was cheaper to use cards. if we now compare this with the choices that the consumers actually made, the conclusion is that in 2002 it would have been better from the point of view of the swedish economy if the consumers had made more payments by card and fewer payments in cash. from society ’ s point of view, it was profitable to pay by card when the sums were higher than sek 70, but, as was the investigation from 2006 made evident, the “ average consumer ” nevertheless chose to wait until the sums were higher than sek 123. eight years have now passed since the study was conducted and it is much more likely that the costs of using cash have increased rather than decreased. for example, the costs for increasing the security of transportation and atms have been substantial. on the other hand, available evidence suggests that a card payment costs somewhat less today. one reason for this is that the shops ’ costs for getting a card payment redeemed seem to have fallen due to increased competition between the card acquirers. the level at which it becomes more advantageous to the economy to use cards rather than cash has therefore probably fallen below sek 70. the survey we conducted last year shows that we use cards to an increasing extent and for smaller and smaller payments. it is not unlikely that today ’ s “ average consumer ” would choose to pay by card for an amount below se