Select an Investment Strategy and Build a Portfolio Report Writing - Management Assignment Help

Assignment Task:

Task:

You are to select an investment strategy and build a portfolio. You are to explicitly declare your investment strategy and provide us with a detailed reasoning for the selected strategy and the thereof selected investments.

The trading period is restricted to app. 4 weeks (30 days +- a few days in case a weekend or holiday pops up) to keep the data monitoring at an acceptable level.
No trading after you have made all the initial investments, this should be one investment decision and monitoring thereafter.

The period, i.e., when your group decides to start the investment period, is up to you, it has to be completed when the presentation is to be held. The period should be: 04.11.2019 – 12.12.2019.
You are to use real data and monitor the value development of your portfolio on a daily basis. Use closing data, or whatever data you can lay your hands on but be consistent.

Before you begin, you have to decide upon an investment strategy and, based on the strategy, draw P&L diagrams for various scenarios of development of the underlying. At the end of the trading period you have to show the actual development of your individual positions and describe what happened. Where did theory fail and why.

When selecting the investments, I would recommend to use only a few investment vehicles to keep the project at an acceptable work load and to select derivatives that have the same underlying.
The requirement is to include at least 1 option or 1 future or 1 SWAP, potentially a bond and/or a stock.
 

Possible strategies:
- Construct a structured product o Hedge a position against interest rate risk or exchange rate risk. o Try to develop a strategy to insure you against an adverse market development
- Alternatively, you could try to build a portfolio that increases in value if the market declines.
- Use the concept of VaR to limit the maximum loss. ·

For calculations use continuous compounding.
The focus is not on stock valuation although you might have to perform some initial analysis to determine the future direction of your stock as part of the argument for your strategy. ·

Consider all individual contract specifications as they are provided by the exchanges, including margin account requirements, option details, possible spreads, clean prices i.e. dirty prices, maturity dates, market interest rates, interest rate risk, dividend payments, duration etc.

Show your position at the end of the trading period and calculate the performance using appropriate performance measures. · Your benchmark is the a priori determined value development based on the development of the underlying.

The investment amount is unlimited, i.e., use a fictional amount (eg: 10 Million €), the return or performance measure should be a relative measure.

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