Fair Value Adjusted Pricing of Mutual Funds Using Treasury Futures

Jiequn Guo
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Jiequn Guo: Beijing Information Science & Technology University, Beijing, P. R. China

Journal of International Commerce, Economics and Policy (JICEP), 2018, vol. 09, issue 01n02, 1-9

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.

Keywords: Mutual funds; net asset value; fixed income securities; treasury futures; fair value pricing (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1142/S1793993318500060

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