The Study Of Liquidity Risk Management Based On Open-ended Fund Portfolio

Fund liquidity risk is decided by the fund property and its operation model of investment strategy jointly. Open-end fund does not have restrictions on the amount of shares, and the fund can issue and redeem shares at any time any place according to the fund contract, which means that fund holders by redeeming their fund in hand can transfer risks, including moral hazard, market risk, management risk and etc., to fund managers and other fund holders. A huge redemption amount usually links to a high liquidity risk while a high liquidity risk can result in large amount of redemption as well. Therefore, fund redemption volume and liquidity risk are positively correlated, being stimuli to each other.Open-end funds liquidity risk in turn depends on the fund's investment strategy. Open-end funds invest in varieties of stocks, bonds and notes. Compared to stocks, bonds and notes have smaller volatility of returns and poorer liquidity; correspondingly, they share smaller risk or even no risk. Therefore, in an open-end fund, the liquidity risk of equity portfolio makes the central core of all risk, the accumulation and outbreak of which may lead to further increase of the redemption which in turn increases the core risk, thus to form a "redemption volume-stock portfolio risk" vicious cycle, probably endangering survival of the fund directly. Therefore, the liquidity risk of stock portfolio is the core issue for open-end funds. Strengthening balanced management on the liquidity risk of stock portfolio turns out to be the most effective way to achieve liquidity risk management goals of open-end funds.To explore the effective path in depth, the contents of this article are arranged mainly around a central theme, relying on two backgrounds and focusing on three issues. A central theme is how to effectively manage liquidity risk for purpose of minimizing the liquidity risk of the stock portfolio, optimizing the amount of cash on fund's hand and maximizing the growth rate of net value of fund units. For two backgrounds, one is theoretical background of formation mechanism of liquidity risk, and the other is theoretical background of inherent relationship among various liquidity risks the fund confronted with. As for three issues, first is to build models about quantitative indicators of endogenous liquidity risk and to make empirical analysis; second is to do qualitative analysis on the liquidity of stock portfolio, focusing on factors affecting redemption behaviors that are positively correlated with liquidity risk; Based on aforementioned quantitative and qualitative analyses on liquidity risk, the third issue is to propose specific solutions on how to realize balanced liquidity risk management so can basic objectives of risk management be achieved and can this paper's central theme be fulfilled as much as possible.According to the central theme, the research contents are to be discussed in three parts:The first part mainly consists of the first, the second, and the third chapters. The research background and significance are elaborated; the connotation, formation mechanism and root causes of liquidity risk together with risk management objectives are discussed; and the special nature of China's open-end funds, which is attributed to China capital market's specialty, is analyzed. Eventually comes to the view that the root causes of liquidity risk depends on the properties of open-end funds and their operation modes of investment strategies, determined by their institutional arrangements, formed in the asset allocation, and ultimately manifests in the process of assets realization.The second part is the fourth chapter, which focuses on the liquidity risk of stock portfolio, constructing several indicators that can represent liquidity risk, using standard normalized parametric method to deduce following model that can measure liquidity risk.(?)Besides, empirical analysis and comparison between single portfolio of securities and fund stocks'Lt-VaR are conducted.The fifth chapter forms the third part in which the qualitative analysis on the liquidity of stock portfolio is carried out. This part also expounds factors that affect redemption behaviors which are positively correlated with liquidity risk, discusses balanced management strategy for liquidity risk, and proposes specific solutions to achieve basic objectives of risk management so can this paper's central theme be fulfilled as much as possible.