IMF Working Papers

On Swing Pricing and Systemic Risk Mitigation

By Sheheryar Malik, Peter Lindner

July 18, 2017

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Format: Chicago

Sheheryar Malik, and Peter Lindner. On Swing Pricing and Systemic Risk Mitigation, (USA: International Monetary Fund, 2017) accessed December 22, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Swing pricing allows a fund manager to transfer to redeeming or subscribing investors the costs associated with their trading activity, thus potentially discouraging large flows. This liquidity management tool, which is already used in major jurisdictions, may also help mitigate systemic risk. Here we develop and apply a methodology to investigate whether swing pricing does in fact help dampen flows out of funds, especially during periods of market stress. Drawing on evidence of first-mover advantage within a group of ‘swinging’ corporate bond funds, we provide policy considerations for enhancing the tool’s effectiveness as a systemic risk mitigant.

Subject: Asset and liability management, Asset management, Financial regulation and supervision, Financial sector policy and analysis, Liquidity management, Liquidity risk, Revenue administration, Risk mitigation in revenue administration, Systemic risk

Keywords: Asset management, Europe, Fund manager, Global, Liquidity management, Liquidity risk, Mutual funds, NAV path, Pricing fund, Redemptions, Risk mitigation in revenue administration, Swing pricing, Systemic risk, Trading cost, WP

Publication Details

  • Pages:

    40

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2017/159

  • Stock No:

    WPIEA2017159

  • ISBN:

    9781484310151

  • ISSN:

    1018-5941

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