Empirical Research On Risk Management Of China's Open-end Funds

Until the end of 2009, there are 66 fund managing companies that manage 611 funds in China: 575 open-end funds and 36 close-end funds. 94% of all funds are open-end funds. Recently, open-end fund of China which has become the largest institutional investors in securities markets has made great strides development. However, the market of China's open-end fund is an emerging market and mainly dependent on China's macroeconomic development and the securities markets. With the scale of open-end fund continually expand, how to avoid the market risk of asset portfolio and maximize the interests of fund holders that we face new issues. Therefore, it is important theoretical and practical significance that how to effectively analyze, respond to and resolve open-end fund of market risk.Firstly, this paper explains the details of types and characteristics of open-end fund's risk, and analyzes the market risk which the open-end fund faced. Then we deeply study the resource of market risk, risk identification, risk quantification and risk control.Next, this paper describes in detail the traditional methods of risk management, including the variance-covariance method, historical simulation, Monte Carlo method, RM models and VaR-GARCH model. Then, use RM model and VaR-GARCH Model to study China's open-end fund.In addition, this paper discusses VaR theoretical system, study and analyzes the sources of risk by using of marginal VaR, component VaR, incremental VaR, and gives the risk contribution rate of each asset and the best hedge ratio.Finally, the paper emphasizes the application of VaR in open-end fund portfolio management and asset allocation. Based on the Markowitz portfolio theory, we get the asset allocation of optimal solution by using VaR. The model is applied to the empirical research on risk management of open-end funds in China by using the latest data, and the problems of fund market in China are analyzed in this paper.