Study On The Liquidity Risk Of China’s Open-end Fund

The advanced operation mechanism and scientific institutional frameworkof the open-ended fund are the reasons why it can be developed rapidly.Comparing with the close-ended fund, redeeming is the most importantinnovation of the open-ended fund. However, the system of redeeming alsocauses the liquidity risk that the open-ended fund is difficult to avoid.The fund investors of China are the investors with limited rationalcharacteristics because of asymmetric information in the securities market.The paper shows the commonness and difference among different kinds offund investors. Redeeming of open-ended fund in China is severer; Fundinvestors prefer short-term holding of fund.In order to strengthen the management of the liquidity it is necessary tomeasure the liquidity risk of open-ended fund, it is necessary to manage theliquidities of fund assets and cashes and balance their structure of risks.This paper had studied China’s open-end fund liquidity risk from China’sactual conditions on the basis of other country’s experience and researchresults. Articles in the structure will be as follows:Chapter1explains the background and leads to study topics from thetheme.Chapter2introduces in detail the analysis of the open-end fund liquidityrisk of the general mechanism and liquidity risk management connotations. Ithas a close relationship between the operational and product characteristics ofopen-end fund and the liquidity. So that the management for liquidity risk ofopen-end fund is of great significance.Chapter3through the empirical studying on Chinese open-end fundredemption, leads to the possible redemption of its cause.Chapter4based on VaR method of thinking and analysis use of L-VaRmethods measure the value of assets at liquidity risk. Chapter5studied on the fund’s assets liquidity and funding sources ofliquidity management, rational distribution of the assets of the funds,balanced fund assets and sources of funding structure of the risk, reduce andresolve the liquidity risk.Chapter6is the main conclusions of this paper and research prospects.