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

Cheng Wei, Guifang Ren and Jinyu Wang

Modern Applied Science, 2007, vol. 1, issue 4, 102

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.

Date: 2007
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