Build a leveraged portfolio using derivatives

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Reference no: EM131450543 , Length: word count:1500

Assessment - Essay

Topic Authentic Task - Individual Essay

Detailed Information Authentic Task - Individual Assignment The aim of the essay is to assess student's active learning by asking them to build a leveraged portfolio using derivatives. A market quoted stock will be assigned to each student who has to monitor the actual price trend during the time the subject is running. At the same time the student has to build two different scenarios based on bad and booming trends for the assigned stock.

Following a Montecarlo simulation, the student has to apply hedging strategies on a marking-to-market basis to minimise losses and/or maximize profits. At the established expiration, the student has to report the theoretical and actual value of its portfolio, as well as alpha, beta, delta and vega of the portfolio with the relative leverage level.

Once a stock is assigned, the student has to monitor and report the actual daily change using an excel spreadsheet and build the daily alpha and beta of a synthetic leveraged portfolio. The time horizon is 6 weeks (expiration).

Following a standard Montecarlo simulation, the student has to build two different scenarios, showing potential losses and potential gains within the horizon established.

Based on the two scenarios above, the student has to build two hedged portfolios per each scenario respectively, by taking leveraged position on both futures and options trading over assigned stock. Positions must be reported using the payoff scheme taught in the subject.

The student has to evaluate its daily position and portfolio value according to:

The two different scenarios (bad vs booming).
The actual price changes of the underlying stock assigned.

Report the Delta and Vega of the portfolio.

Brief conclusion and suggestions based the distinction between trading the hedged portfolio as a professional and an individual to measure the relative risk exposure.

Attachment:- Assignment Files.rar

Reference no: EM131450543

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Reviews

len1450543

4/4/2017 6:20:35 AM

Total 1500 words. Very High - Quality Work Needed. Please check Page 8 Assessment 1 in PDF File. Please also refer to the attached files in the folder Client: Harvard reference style need 8 references. The client ID number is 4407271 so choose the LLC Lendlease Group Unit/ Stapled Securities Star Stock $14.77. We need 18 weeks binomial tree, which means 18 steps binomial tree, I already found the 30 days data of spot price from S0 to S30, and now you should find 60days data before S0, it is 90days totally. The S0 price given by tutor that is$14.77, you can find the data from yahoo finance.

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