Study On The Risk Management Of China's Open-end Fund

Until the end of 2005, there are fifty-three fund managing companies that managing two hundred and eighteen funds: 164 open-end funds and 54 close-fund funds. Seventy-five percent of all funds are open-end funds. That open-end fund developing quickly put forward a new problem, which is the risk measure and control of the open-end fund. A scientific risk analysis and evaluation system which analyses the origin of risk should be established to control the risk effectively, provide the decision-making warranty. The system is very important to not only the investors, fund managing companies but also supervising departments.Based on referring to literature widely, this paper analyses the risk types and characteristics of open-end fund in china, and probes into the theory of analysis and control of market risk and liquidity risk. And the particularities of risk management in China are analysed in this paper. By analyzing and seeing about the origin of risk, an open-end fund risk analysis system which can measure the potential risk is established in this paper. Considering the cost of adjusting the fund investment, a coefficient of investment change is introduced to establish the model controlling the liquidity risk. The model makes it possible that the fund managing companies having different adjustable requirement and endurance level adjust their corresponding investment. Based on it, this paper measures the open-end fund's risk management by using modern financial risk control technique: VaR and LVaR. A measure analysis system of analyzing the market and liquidity risk, keeping away the market and liquidity risk is established in the paper.Finally, the measure analysis system is applied to the open-end fund management in China by using the latest data, and the problems of fund market in China are analysed in the paper.