Modeling based on market rates as a way to estimate the price of Chilean fixed- income investment fund shares: linear and non-linear methodologies explained

Abstract

This study addresses a problem that Chilean stockbrokers must face when - acting as market makers - they have to determine bid and ask prices for local fixed-income investment fund shares.
As a solution, a mathematical model is proposed based on a share’s last known net asset value and the daily fluctuation of the reference fixed-income market rate (Central Bank of Chile bonds in 5-year development units - BCU 5). Results obtained show a clear improvement of the proposed model’s outcome when compared to simply using the last information available in the market to determine the share’s price.
Keywords Investment funds, Market Maker, Chile
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How to Cite
Parraguez Sasso, B. (2021). Modeling based on market rates as a way to estimate the price of Chilean fixed- income investment fund shares: linear and non-linear methodologies explained. Estudios de Administración, 28(2), 29-51. doi:10.5354/0719-0816.2021.61573
Published
2021-12-18