The Research Toward The Stock Liquidating Strategy Of Open-end Fund Under The Redemption Pressure

The redemption mechanism of open-end funds determines its particular liquidity risk. For dealing with the possible demands of redemption from investors, it's necessary for the open-end fund being clever at the optimal asserts liquidation strategy except having a good asserts collocation. The optimal liquidation strategy means the manager should take an effective tradeoff between each market factors such as volatility, drift, market impact and the correlation to determine the reasonable trading schedule. Among the market factors, the modes of market impacts are our focus. This paper uses a method to estimate the function of market impact. Besides, the paper has constructed two models to develop empirical analyses to some stocks listed in our market in the light of the market microstructure theory. The results indicate the modes of market impact evolving between concave and convex according to the market environment and the stock's characteristic.The paper systematically introduces the liquidation strategy about single stock as a base and extends the model in a discrete time frame, considering the joint decision-making of cash prearrange and liquidation in the hypothesis of the redemption and buy claim followed a Poisson distribution, and build a model. The optimization factor of correlations among stocks is the emphasis. The paper integrated this factor in the portfolio liquidation model based on single stock liquidation model. We introduce a quantitative index called liquidity adjusted value at risk to evaluate the execution performance. Finally, the paper constructs some numerical problem to validate the model. We get some conclusions:(1) The liquidation strategy varied considering the factor of correlation while transacting multiple stocks. The level of liquidity-adjusted value at risk indicates the manager should liquidate stocks when there are negative correlations between them for reducing the cost.(2) The buy-in and sell-short emerge in some case of special parameters, which incarnates the tactics in portfolio liquidation. The manager should take advantage of the corporation of buy and sell towards a unitary goal.(3) The liquidating strategy of single stock would underestimate/overestimate the cost if the stocks do have positive/negative correlations.(4) We find the liquidity-adjusted value at risk is an explicit evaluating index, which can give the manager a objective guideline.