Analysis And Management On The Liquidity Risk Of Open-end Fund

Mobility is the basic attribute of financial assets, but also the basic function of financial markets. Due to the amount of mobility of institutional arrangements, open-end funds than the general financial institutions assume greater liquidity risk. Mobility management relates at the macro level to the fund industry, and even the safe operation of the securities market. It also decides at the micro level of an open-end fund's existence and development. How to coordinate with the mobility of the proceeds of the contradictions and effectively control liquidity risk management is an open-end fund the core issue.This paper takes mature markets'theory and empirical studies of open-end fund liquidity risk management as the basis, and proceeds systematic theoretical and empirical studies of China's open-end fund liquidity risk in accordance with the "discovery - analysis - to solve the problem" of the logical framework. First of all, it focuses on the formation mechanisms and the root system of liquidity risk, and based on this, in-depth analyses China's open-end fund liquidity risk and special causes, furthermore advances the measures and countermeasures of how to build liquidity risk management system.Chapter I is an open-end fund liquidity risks outline, the main contents include open-end fund liquidity risk the meaning, formation mechanism and metrics. Combining the explanations of the mobility, we make the following definition: open-end fund liquidity risk means the fund is facing redemption pressure, in its realizable assets held by the process of price uncertainty and may suffer losses. The formation of open-end fund liquidity risk, as commodity on the market supply and demand determine the price of goods, its liquidity supply and demand relationship determines the size of liquidity risk. When the liquid flows of supply and demand do not match, it will often lead to the reduction of liquidity, thereby creating liquidity risk. To better manage the risks of open-end funds, liquidity risk for quantitative analysis is necessary. There is no single standard measure of open-end fund liquidity risk. We can design indices, such as the choice of redemption rate of investors, retail rate of investors, the average holding time for investors and fund asset liquidity, liquidity ratio of cash ratio and other indicators.Chapter II is the theory studies of open-end fund liquidity risk, and there are three main perspectives: the characteristics of open-end fund contract, the redemption of fund investors and fund managers'moral hazard. In this particular organization of funds, the relationship between the relevant reflects a special contractual relationship. Compared to closed-end funds, open-end funds investors in the contract performance characteristics under the lease provisions can be released in accordance with the daily net value of fund assets to purchase, and withdrawal at any time. Such redemption of fund management system with the great restraint, we could be called redemption control. This is a redemption control costs. In order to meet investor redemptions, open-end fund assets must maintain certain mobility, and this is an open-end fund redemption costs. Next from Vikram Nanda (2000) model of thinking and with the actual situation of the domestic, the paper focuses on how the fund's ability to invest, investors'liquidity preferences and fund transaction costs impact fund size. Through this model, we can come to the conclusion: Fund managers should improve the management capacity, attract more investors of low mobility demand, and reduce the amount of investors with higher mobility demand through charging redemption fees. In a balance state, these investors of low liquidity needs can share the benefits of the fund. The final part is an analysis of the relationship of fund managers'moral hazard and e open-end fund liquidity risk. Fund managers'moral hazard refers to the fund management are their own interests or the interests of its shareholders to make damage to the interests of the holders of the fund. Moral hazard once exposed, will enable the fund holders or investors to change the original psychological expectations and this will form a two-pronged impact: first fund holders have a panic mentality and there will be a lot of redemption; second the number of purchase will decreases. This will make funds facing enormous liquidity risk. The analysis in this section has two parts: the formation of fund managers'moral hazard and the performance of fund managers'moral hazard.Chapter III is the liquidity risk analysis of China's open-end fund. First, this chapter describes the development process of China's open-end fund. Second, it is a analysis of the current status of China's open-end funds liquidity risk. Taking into account the availability of data, the paper only from the fund redemption, the concentration of funds'securities analyses the current status of China's open-end funds liquidity risk. China's open-end funds have suffered numerous large-scale redemptions, which highlights the funds'liquidity risk. In addition, the concentration of funds'securities also demonstrated the funds'liquidity risk. The final part is the special causes of China's open-end fund liquidity risk. There are four major areas: the asymmetric of sources of funds and capital structure; the contradiction of market speculative and fund investment ideas; policy factors in inadequate affecting demand and supply of funds.Chapter IV is the management strategies of open-end fund liquidity risk. First part is the mobility of asset management, which includes three aspects: to determine the optimal cash remaining stock, to develop open-end funds realized optimal strategy for mobility assessment and rational allocation of fund assets. Second, it is the liquidity of debt management, which is in fact the fund's financing problem. There are two aspects: commonly used means of financing of open-end funds and how to make open-end fund financing decision. Finally, it is the strategies of system .There are three main perspectives: the fee structure of purchase and redemption, to design personalized fund products and establishment of the organization and support system of open-end fund liquidity risk management.This paper is a systematic study of open-end fund liquidity risk, mainly involving the open-end fund liquidity risk on the theory, the facing liquidity risk profile of China's open-end funds and building an open-end fund liquidity risk management system. This paper draws on some immature views of open-end fund liquidity risk management based on the research achievements at home and abroad. However, as the author knowledge is limited, some problems of open-end fund liquidity risk management are not very well studied, particularly the empirical study which is not thorough enough. The writer takes efforts to make further research of these problems.