Liquidity Risk Evaluation Of Open-ended Fund In China

With the development of financial markets, open-ended fund has become an important financial tool among others. Compared with closed-ended fund, open-ended fund has been welcomed because they can be purchased and redeemed based on the investors' own judgments. However, the problem of liquidity risk management is arisen concomitantly for the reason of above unique characteristics. The fund managers may sell part of their securities at a lower price when large redemption was made by the investors, which will cause substantial loss on open-ended fund, and this kind of mismatching in liquidity between fund asset and liability is defined as liquidity risk in economics. The existence of liquidity risk damages the stable operation of open-ended fund. Liquidity risk is a tough problem encountered by the open-ended fund managers in the world at the present time. It is even tougher in Chinese securities markets due to the facts of imperfect of Chinese capital market, immaturity of investment mind and low fund management. As a result, it is important for the fund managers in China to calculate and prevent this kind of liquidity risk.This paper focuses on liquidity risk of open-ended fund. By absorbing related theories in China and foreign countries, formation causes and influential factors of liquidity risk of open-ended fund in China were analyzed by using of quantitative and qualitative methods, which will be expected to provide some advices in order to control liquidity risk.This paper was arranged as follows: some related theories on liquidity risk were summarized firstly; and then the state-of-the-art on liquidity risk of open-ended fund in China was brief discussed based on its definition. Case study was presented in the third chapter. Liquidity risk of open-ended fund was analyzed by using quantitative method from the aspects of ownership concentration, fund net growth, and changes in the share of the funds rate, which contribute to the changes of liquidity risk of open-ended fund. Formation causes and influential factors of liquidity risk of open-ended fund were analyzed qualitatively in the forth chapter. Finally, some advices from internal and external aspects were provided by considering management problems of liquidity risk in China.