Liquidity Management with Stock-Index Futures

Kris Shen and Shaojun Zhang ()
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Kris Shen: Fisher College of Business, The Ohio State University
Shaojun Zhang: Fisher College of Business, The Ohio State University

Chapter Chapter 9 in Derivatives Applications in Asset Management, 2025, pp 151-171 from Springer

Abstract: Abstract Effective liquidity management is essential for active mutual funds, particularly those managing substantial assets in dynamic market environments. This chapter explores the critical role of stock-index futures contracts in liquidity management, offering practical tools and strategies for managing cash flows, meeting redemption demands, and maintaining market exposure. The discussion covers key techniques, including cash buffers, liquid assets, and advanced derivative strategies such as rolling futures contracts and mixed approaches using options and futures. Case studies illustrate how fund managers reinvest dividends, manage inflows and outflows, and optimize portfolio exposure under varying market conditions. Additionally, the chapter addresses challenges in liquidity management, including transaction costs, volatile markets, and regulatory uncertainty. By leveraging index futures and other derivatives, fund managers can achieve efficient liquidity management while preserving strategic objectives and investor confidence.

Keywords: Liquidity management; Stock-index futures; Active mutual funds; Derivatives strategies; Redemption management; Portfolio optimization (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-86354-7_9

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DOI: 10.1007/978-3-031-86354-7_9

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