Is the price right? Swing pricing and investor redemptions

Ulf Lewrick and Jochen Schanz

No 664, BIS Working Papers from Bank for International Settlements

Abstract: How effective are available policy tools in managing liquidity risks in the mutual fund industry? We assess one such tool - swing pricing - which allows funds to adjust their settlement price in response to large net flows. Our empirical analysis exploits the fact that swing pricing is available to Luxembourg funds, but not yet to U.S. funds. We show that swing pricing dampens outflows in reaction to weak fund performance, but has a limited effect during stress episodes. Furthermore, swing pricing supports fund returns, while raising accounting volatility, and may lead to lower cash buffers.

Keywords: Financial stability; mutual funds; regulation; market liquidity (search for similar items in EconPapers)
JEL-codes: C72 G01 G23 G28 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2017-10
New Economics Papers: this item is included in nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:664

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