In this assignment, you will be asked to create a portfolio of your own choice, devise hedging strategies using futures
Posted: Sun May 08, 2022 10:14 am
In this assignment, you will be asked to create a portfolio of
your own choice, devise hedging strategies using futures contract,
and analyse the performance of your strategy. The objective of your
strategies is to reduce the risk of your portfolio, but the grade
awarded will be based on
• A logical, coherent strategy designed to hedge the associated
risk
• A demonstration of lecture theory in a practical setting
showing your understanding.
• An analysis of the strategy performance apropos of the
original intention
Part 1: Construct your own equity portfolio (the members
of your portfolio must be described in your context), and then
analyse it using PORT and as an index created from
CIXB
• Select 10 different stocks from the S&P 500 index members,
the stocks you choose should cover at least 3 different industrial
sectors. You must state the reason why you want to invest in the
chosen stocks in your context. • You need to decide how many number
of shares you hold for each stock but make the number of shares for
the stocks in your portfolio large enough so that your portfolio’s
market value is approx $10 million.
• Select a time period, and create historical data for your
portfolio (see workshop section ”Steps for Creating Historical Date
for Portfolio in PRTU”). • Import your portfolio in CIXB and create
historical data (see Workshop 2 ”Bloomberg CIXB Screens”)). Write a
short report to include the following elements: evaluate the
performance of your portfolio in PORT (It is understandable that
you do not know every statistics presented in PORT, however, you
should at least focus on 3 to 5 statistics and form up your
discussion), examine your portfolio as a basket created in CIXB by
examining its historical values (GP) and regression relation with a
market index (relevant figures and regression tables should be
attached), with extra marks awarded for good quantitative analysis
provided.
Part 2: Examine an ex-post short hedging position for
the portfolio you created and write a report to evaluate your
strategy
• Select one futures contract on S&P 500 (SPA) to hedge your
portfolio. Use the expiration date on the future contract as the
date of your hedge value.
• Select a beginning date that you would have implemented your
hedge and a closing date near the futures expiration as the date
for closing your hedge. Use the Minimum Variance Hedge model to
determine the number of futures contracts needed to hedge the
portfolio.
• Use Bloomberg’s OSA screen to determine the number of futures
contracts you would need to hedge your portfolio. Is number of
future contracts you calculated from Bullet Point 2 above, the same
as the number of future contracts calculated by the Bloomberg
Terminal? If not, why?
your own choice, devise hedging strategies using futures contract,
and analyse the performance of your strategy. The objective of your
strategies is to reduce the risk of your portfolio, but the grade
awarded will be based on
• A logical, coherent strategy designed to hedge the associated
risk
• A demonstration of lecture theory in a practical setting
showing your understanding.
• An analysis of the strategy performance apropos of the
original intention
Part 1: Construct your own equity portfolio (the members
of your portfolio must be described in your context), and then
analyse it using PORT and as an index created from
CIXB
• Select 10 different stocks from the S&P 500 index members,
the stocks you choose should cover at least 3 different industrial
sectors. You must state the reason why you want to invest in the
chosen stocks in your context. • You need to decide how many number
of shares you hold for each stock but make the number of shares for
the stocks in your portfolio large enough so that your portfolio’s
market value is approx $10 million.
• Select a time period, and create historical data for your
portfolio (see workshop section ”Steps for Creating Historical Date
for Portfolio in PRTU”). • Import your portfolio in CIXB and create
historical data (see Workshop 2 ”Bloomberg CIXB Screens”)). Write a
short report to include the following elements: evaluate the
performance of your portfolio in PORT (It is understandable that
you do not know every statistics presented in PORT, however, you
should at least focus on 3 to 5 statistics and form up your
discussion), examine your portfolio as a basket created in CIXB by
examining its historical values (GP) and regression relation with a
market index (relevant figures and regression tables should be
attached), with extra marks awarded for good quantitative analysis
provided.
Part 2: Examine an ex-post short hedging position for
the portfolio you created and write a report to evaluate your
strategy
• Select one futures contract on S&P 500 (SPA) to hedge your
portfolio. Use the expiration date on the future contract as the
date of your hedge value.
• Select a beginning date that you would have implemented your
hedge and a closing date near the futures expiration as the date
for closing your hedge. Use the Minimum Variance Hedge model to
determine the number of futures contracts needed to hedge the
portfolio.
• Use Bloomberg’s OSA screen to determine the number of futures
contracts you would need to hedge your portfolio. Is number of
future contracts you calculated from Bullet Point 2 above, the same
as the number of future contracts calculated by the Bloomberg
Terminal? If not, why?