A hedge fund manager is worried about a possible surge in investor redemptions and seeks to evaluate the impact of such an event on the fund's liquidity. The manager requests a junior analyst to determine the average number of days needed to liquidate specific securities held in the fund. The analyst utilizes the data provided below to perform this assessment for four securities:
| Security | Market value of security in the fund (CNY million) | Shares of security in the fund | Average daily trading volume | Maximum daily volume allowed for liquidation (expressed as a percentage of average daily trading volume) |
|---|---|---|---|---|
| A | 93.00 | 500,000 | 522,000 | 22% |
| B | 173.04 | 250,000 | 1,328,000 | 12% |
| C | 58.88 | 260,000 | 710,000 | 18% |
| D | 29.80 | 640,000 | 848,000 | 20% |
Which of the four securities listed above is anticipated to require the greatest amount of time to liquidate?
A
Security A
B
Security B
C
Security C
D
Security D
Explanation:
The explanation provided in the file content indicates that to determine which of the four securities would take the longest to liquidate, the junior analyst calculated the liquidity duration (LDi) for each security using the formula:
[ \text{LDi} = \frac{Q_i}{(\text{MDV} \times V_i)} ]
Where:
The calculations for each security are as follows:
Based on these calculations, Security A has the highest liquidity duration (LDi), which means it would take the longest time to liquidate compared to the other securities listed. Therefore, the answer is Security A.
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