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An Extreme Application of the Theoretical Prediction Open-end Fund Redemption of Methods

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  • Cheng Wei
  • Guifang Ren
  • Jinyu Wang

Abstract

The open-end funds have liquidity risk, one of the main reasons !a the open-end fund huge redemption is elaborated, thpaper uses the extreme value theory measure the liquidity risk. Through the analysis, we found that the extreme application fit to forecast open-end fund redemption amount of their probability of occurrence, and use maximum likelihood method to estimate the parameters and goodness-of-fit test. This paper also uses the Monte Carlo method to the results for further simulation experiments, and forecast the mean and standard deviation of the redemption of the fund. Fund managers may, under certain probability, predict funds for the redemption, resulting in an appropriate reserve of cash, avoiding reasonably the open-end fund which provides liquidity risk. That is a good prediction method.

Suggested Citation

  • Cheng Wei & Guifang Ren & Jinyu Wang, 2007. "An Extreme Application of the Theoretical Prediction Open-end Fund Redemption of Methods," Modern Applied Science, Canadian Center of Science and Education, vol. 1(4), pages 102-102, November.
    • Handle: RePEc:ibn:masjnl:v:1:y:2007:i:4:p:102
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    References listed on IDEAS

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    1. Daniel, Kent, et al, 1997. "Measuring Mutual Fund Performance with Characteristic-Based Benchmarks," Journal of Finance, American Finance Association, vol. 52(3), pages 1035-1058, July.
    2. Goldstein, Michael A. & A. Kavajecz, Kenneth, 2000. "Eighths, sixteenths, and market depth: changes in tick size and liquidity provision on the NYSE," Journal of Financial Economics, Elsevier, vol. 56(1), pages 125-149, April.
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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