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US mutual funds, UK unit trusts and OEICs, European SICAVs, and hedge funds are all examples of open-ended funds. The price at which shares in an open-ended fund are issued or can be redeemed will vary in proportion to the net asset value of the fund and so directly reflects its performance.
Net asset value (NAV) is the value of an entity's assets minus the value of its liabilities, often in relation to open-end, mutual funds, hedge funds, and venture capital funds. [1] [2] Shares of such funds registered with the U.S. Securities and Exchange Commission are usually bought and redeemed at their net asset value. [3]
Martingale pricing is a pricing approach based on the notions of martingale and risk neutrality. The martingale pricing approach is a cornerstone of modern quantitative finance and can be applied to a variety of derivatives contracts, e.g. options , futures , interest rate derivatives , credit derivatives , etc.
The net asset value formula is calculated by adding up what a fund owns and subtracting what it owes. For example, if a fund holds investments valued at $100 million and has liabilities of $10 ...
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Most open-end funds also sell shares to the public every business day; these shares are priced at NAV. Open-end funds are often referred to simply as "mutual funds". In the United States at the end of 2019, there were 7,945 open-end mutual funds with combined assets of $21.3 trillion, accounting for 83% of the U.S. industry. [8]
OEICs are open-ended; the fund is equitably divided into shares which vary in price in direct proportion to the variation in value of the fund's net asset value. Each time money is invested new shares are created to match the prevailing share price; each time shares are redeemed the assets sold match the prevailing share price.