Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments March 2022 erstellt
Description:
This working paper was written by Gabriel Wu (Hong Kong Monetary Authority), Joe Wong (Hong Kong Monetary Authority) and Tom Fong (Hong Kong Monetary Authority).The March-2020 episode has raised questions on whether the post-GFC reforms on the liquidity management of open-ended funds’ (OEFs) adequately contain their liquidity risk in times of market stress. Using an extensive dataset that covers this episode, our study shows that swing pricing could help to mitigate OEFs’ redemption pressures in times of market stress. However, the mitigating effect may be limited by several factors. First, the swing pricing-led volatility of OEF returns would lead to a larger volatility of OEFs’ flows. Secondly, swing pricing would encourage OEFs to raise leverage during normal periods, which may lead to substantial losses and amplify the redemption pressures in a stressful episode. Thirdly, some OEFs may not disclose the usage of swing pricing, but such non-disclosure practice could weaken the effectiveness of swing pricing. Our findings have two policy implications. First, while the results suggest that swing pricing would be one effective tool for liquidity management of OEFs, it may come with “side effects”, including larger flow volatility and higher leverage. A proper design and combination with other risk management tools may be warranted for swing pricing to work in a more effective way. Second, policies to promote a higher level of relevant disclosures may also enhance the effectiveness of swing pricing