Derivatives and Alternative Investments Assignment

Assignment Task

A major political election the UK PM elections, the Brexit referendum etc., can cause drastic market fluctuations. Prior to such an event, nobody knows the political outcome and hence nobody is sure whether the market will swing up or down. However, it is highly likely that the political outcome will impact the market significantly, either way.

In this empirical project, you are required to

• pick a historical event that you believe was significant;
• pick a particular investable security and pretend that you were holding this security prior to the event; and
• design an option strategy based on this security to turn this political event into a profitable opportunity.

Your report should at least include the following

• Sufficient description of the political event of your choice;
• Clear description of your then existing investment position (hypothetical);
• Based on historical data, clear definition of your option strategy design, e.g., price, strikes, maturity, etc. (options can be hypothetical);
• The rationale behind your strategy design;
• Clear description, using chart, of the theoretical contingent payoffs of your strategy;
• The fair price of your strategy; and
• Based on realized historical data, the profit & loss of your strategy at your strategy maturity, etc.

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