BAFI1029 – Risk Management Assessment Report Writing - Management Assignment Help

Assignment Task:

Task:

INSTRUCTIONS
Please submit a word or pdf file with both your name and student on the first page and then submit a supporting Excel file containing your workings for all of the reported analysis.
Assessment (individual): 50% towards your total mark. Word limit 2000 words. Every 100 words over the limit will be penalized with -1 mark. The figures, references and appendix are not included when counting the number of words.

• Account and Portfolio Creation (Please strictly follow the instruction below, or you may result in zero mark for this assessment)
• Create an account (with your real first & surname) on www.marketwatch.comCreate two watchlists of Portfolios A and B on Thursday, 16th September 2021
• Create a watchlist of Portfolio A ($400,000) consisting of TWO stocks.
• Choose One stock from the S&P500 index plus Amazon.com (AMZN) stock.
• Make the number of shares for AMZN equal to “Last two digits of your student number” if these two digits are larger than 19.
• Make the number of shares for AMZN equal to “First two digits of your student number” if your last two digits are smaller than or equal to 19.
• Example: For student S7777777, you need to hold 77 shares of AMZN in your Portfolio A For student S6660011, you need to hold 66 shares of AMZN in your Portfolio A
• Determine the weight and number of shares for the other stock you chose in step a.
• You have USD 400,000 for Portfolio A.
• Create a watchlist of Portfolio B ($1 million) consisting of Four stocks from the S&P 500
• Choose any Three stocks from the S&P500 index plus Tesla (TSLA)
• Make the number of shares for TSLA equal to “Last three digits of your student number” if they are larger than 99.
• Make the number of shares for TSLA equal to “First three digits of your student number” if your last two digits are smaller than or equal to 99.
• Example: For student S7777777, you need to hold 777 shares of TSLA in your Portfolio B For student S6660011, you need to hold 666 shares of TSLA in your Portfolio B
• Determine the weights and shares for the rest of the stocks you chose in step a.
• You have USD 1 million for Portfolio B.
• Take screenshots of your portfolios and the necessary information in all sections. Make sure you attach them in the Appendix.
• Assignment Overview:
• The goal of this individual assignment is to gain a better understanding of the portfolio investment (in the US stock market) and risk management process. Below are the tasks to be completed in this assessment:
• Your goal is
• to set up and manage two stock investment portfolios A and B,
• to hold these portfolios from Thursday, 16th September 2021 until – Friday, 1 October 2021.
• to identify and manage the portfolio risk, and
• to communicate your investment and risk management process in using a professional report.
• Guideline for Investing and Calculations
• Portfolio Investment Strategy
• Since the trading game is only for the short term, the investment strategy is to generate high short-term growth in the value of the portfolios over the holding period.
• Marking Guide Your report must include the following sections:
• Trading philosophy: (5 marks)
• Give an overview of your trading philosophy. You should identify yourself as a value or growth investor or a mixture of both.
• Portfolio construction: (10 marks)
• Present your initial portfolio, including information on why you have invested in the stocks in your initial portfolio.
• News and the overall market and macroeconomic condition (3 marks)
• The initial weightings of the portfolio and the rationale for that composition (7 marks)
• Risk identification: (25 marks)
• In this part, you should discuss the risk profile of your portfolios. On Friday, 24 September 2021, use daily stock prices since 1st October 2017 to calculate the VaR. The discussion should include the following points:
• Calculation and discussion of the five-day 99%-Value at Risk of your portfolio A using model- building approach. (7 marks)
• Calculation and discussion of the five-day 99%-Value at Risk of your portfolio B using a historical simulation approach. (10 marks)
• Discuss the performance of VaR based on your calculation approaches in (a) and (b), VaR results and actual five-day returns (Monday, 27th September 2021 – Friday, 1 October 2021). (8 marks)
• Hedging using Futures: (25 marks)
• On Tuesday, 21 September 2021, how will you use the E-Mini S&P 500 Future contract to hedge your Portfolio B position against a possible market decline? Provide calculation as necessary. (16 marks)
• Provide a review of your hedging strategy based on the comparison between the portfolio performance with hedging and the portfolio performance without hedging for the holding period between Tuesday, 21 September and Friday, 1 October 2021. (9 marks)
• Hedging using Options: (25 marks)
• On Wednesday, 29 September 2021, how will you use the option contract to hedge one of your three stocks in Portfolio B. You need to determine which option you need to use (i.e., the type of option, appropriate strike price etc.). Provide justification for your decision. (8 marks)
• Calculate the European option price using the option specification you chose in the previous section (i.e., strike price, expiration date, etc.). (11 marks)
• Provide a review of these option prices based on the comparison between the European option price from your calculation and the actual option price you observed in the market. (6 marks)
• The professionalism of the report. (e.g., Usage of professional Figures and Tables.) (10 marks)
• Total=100 marks Note:
• The report will include VAR calculations which will require you to use Excel. Therefore, though the result of calculations should be discussed in the report, you should submit a separate Excel file to Canvas to show your detailed calculations.
• This instruction includes suggestions on items to include in the report, more information for parts you think are important may be included as you feel necessary, keeping in mind the word limit.
• Additional Resources:
• To help you construct your portfolio:
• Information on value investing can be found here: https://www.investopedia.com/university/stockpicking/stockpicking3.aspInformation on growth investing can be found here: https://www.investopedia.com/university/stockpicking/stockpicking4.aspFutures and Options Data
• Futures contract on the S&P500 can be found here https://www.marketwatch.com/investing/future/sp%20500%20futuresOptions contract for, for example, Facebook can be found here. https://www.marketwatch.com/investing/stock/fb/optionsOther data:
• Historical stock prices can be downloaded from open access websites like yahoo finance such as the following link:
• https://finance.yahoo.com/quote/FB/history?p=FB&.tsrc=fin-tre-srch for Facebook historical prices.
• You find a proxy for risk-free rate here 3-month treasury bill https://fred.stlouisfed.org/series/TB3MSAnnual return of the S&P500 can be found
• here https://ycharts.com/indicators/sandp_500_total_return_annualA proxy for risk-free rate such as 3-month treasury bill can be found here https://fred.stlouisfed.org/series/TB3MSCAPM and Beta helpful videos:
• Capital Asset Pricing Model (CAPM) https://www.lynda.com/Finance-Accounting-tutorials/Capital- asset-pricing-model-CAPM/565365/710964-4.htmlWhat is Beta https://www.lynda.com/Finance-Accounting-tutorials/What-beta/565365/710968-4.html

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