@rishi556, thanks for the answers but you might have created yourself a lot of work on this thread! I have to ask, why create HBD to pay the DAO fund and then buy back Hive? This all sounds more and more bizarre lol!
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The DHF pays in HBD so that it pays proposals in a more stable form (to avoid under/over-rewarding for the work being done).
The stabilizer proposal is taking advantage of the current over-priced value of HBD on the market: 1 HBD = $1 dollar worth of Hive, but HBD is trading for around $1.3 to $1.5 right now. But the DHF is able to produce HBD from Hive for only $1 (it's true worth). So the stabilizer is creating HDB for $1 worth of Hive, selling it for 1.3 to 1.5 dollars worth of Hive, then sending the purchased Hive back to the DHF. In practice, I think this ends up reducing the supply of Hive (Hive is burned).