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Fair Value Adjusted Pricing of Mutual Funds Using Treasury Futures

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  • Jiequn Guo

    (Beijing Information Science & Technology University, Beijing, P. R. China)

Abstract

The U.S. Investment Company Act of 1940 requires mutual fund boards to determine fair value of their portfolios. With mutual fund investments on foreign securities, there is a potential market timing issue when markets evolve between foreign and domestic market close. However, there is little research to date relating to fair value pricing procedures for foreign fixed-income securities. In this paper, we discuss the market timing problems and present a statistical approach utilizing treasury futures to fair value pricing of foreign fixed income securities. Timely valuation adjustment of foreign fixed income securities is the best approach to fend off arbitrageurs than raising transaction fees or setting minimum holding period for mutual funds.

Suggested Citation

  • Jiequn Guo, 2018. "Fair Value Adjusted Pricing of Mutual Funds Using Treasury Futures," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 9(01n02), pages 1-9, February.
    • Handle: RePEc:wsi:jicepx:v:09:y:2018:i:01n02:n:s1793993318500060
    DOI: 10.1142/S1793993318500060
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    References listed on IDEAS

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    1. Eric Zitzewitz, 2003. "Who Cares About Shareholders? Arbitrage-Proofing Mutual Funds," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 19(2), pages 245-280, October.
    2. Bhargava, Rahul & Dubofsky, David A., 2001. "A note on fair value pricing of mutual funds," Journal of Banking & Finance, Elsevier, vol. 25(2), pages 339-354, February.
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