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Bad things happen to those who wait: NAV discrepancies of money market funds in Egypt
We conduct an experiment on the Egyptian money market by testing how volatility in interest rates and asymmetric (redemption-only) structure of money market funds (MMFs) affect investors who redeem after interest rate hikes, versus those who remain in the fund. We conduct simulations on MMFs with di...
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| Format: | Thesis |
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AUC Knowledge Fountain
2020
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| Summary: | We conduct an experiment on the Egyptian money market by testing how volatility in interest rates and asymmetric (redemption-only) structure of money market funds (MMFs) affect investors who redeem after interest rate hikes, versus those who remain in the fund. We conduct simulations on MMFs with different durations. Given current MMF accounting treatment, results show that increasing interest rates, higher redemptions than subscriptions, and longer fund durations cause unfair treatment of investors who remain in the fund after disrupted periods. The findings of this research have policy implications to regulators of MMFs in Egypt to apply a rule similar to the SEC's Rule 2a-7. Keywords: Money Market Funds, Global Financial Crisis, Shadow Banking, Floating NAV, Fixed NAV, Accumulated Fixed NAV, Accumulated Floating NAV, Money Market Fund Reforms. JEL Classification: G01; G14; G1 |
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