Case Study (FIN-700): Financial Portfolio Management

Category : Archieve

Case Study (FIN-700): Financial Portfolio Management

Educational purposes only…

Purpose

  • Form a financial securities portfolio with diverse securities
  • Use options with the purpose of hedging
  • Conduct a detailed research about financial securities as well as financial markets.
  • Apply the theory of diversification
  • Apply the Capital Asset Pricing Model
  •  

    Rules

  • Trading Game is used for the portfolio formation.
  • You need to use one username for the entire case study (i.e. same username for all transactions).
  • Your username for this case study must be unique to this case study (i.e. you cannot use a username you already had for other case studies).
  • Please note that the Trading Game uses Yahoo! Finance for all financial figures, financial statements, historical prices, beta, symbols, ticker codes, fund categories, ETF categories, options, futures, commodities, security names, countries and all other information pertaining to this case study.
  • If you submit this case study in a timely manner then you can resubmit this case study for a second time (with a new username). There is no third resubmission.
  • You need to have a new username for the second submission.
  • Once you trade a security, it is reserved. It cannot be traded by anybody else.
  • You need to let me know when you are done so that I can grade your work.
  • All work will be graded immediately after the deadline. Trading Game will not allow you to trade after the deadline.
  • You can use Stata (completely voluntary) to trade or check your work.
  •  

    Directions:

  • (5 points) Maximum allowed funds (based on cost) for the portfolio is $500,000.
  • (5 points) Minimum allowed funds (based on cost) for the portfolio is $475,000.
  • (5 points) You need to buy at least 20 different stocks in your portfolio.
    • (5 points) Within these 20 stocks: you need to have at least five different industries.
    • (5 points) Within these 20 stocks: you need to have at least three different US markets.
    • (5 points) Within these 20 stocks: you need to have at least five different currencies (other than US dollars).
    • (10 points) For each of the 20 stocks: you need to buy at least one put option, with at least three months to maturity, as a hedge.
  • (5 points) You need to buy at least 5 different ADRs in your portfolio.
  • (7.5 points) You need to buy at least 10 different ETFs in your portfolio.
  • (7.5 points) You need to buy at least 10 different mutual funds in your portfolio.
  • (7.5 points) You need to buy one call option, with at least three months to maturity, for 5 different stocks that are not included within your portfolio as speculative positions.
  • (7.5 points) You need to short at least 5 different stocks (different than the above 20) in your portfolio.
  • (25 points) Your entire portfolio Beta needs to be as close to 1 (one) as possible. When estimating portfolio beta:
    • You can use Standard and Poor’s 500 index as the market.
    • You needn’t include the short position.
    • You shouldn’t include the options.
    • You should include stocks, ADRs, ETFs, mutual funds, and foreign stocks.
  •  

    Please note:

  • Cost of options (calls or puts) should not be included in the portfolio value.
  • You receive funding when you short stocks. Your overall portfolio needs to be between $475,000 and $500,000. Thus (for instance), if you short a stock worth $1,000 then you need to buy another stock worth $1,000 to off-set the effect of shorting.
  • Grading:

    THIS ASSIGNMENT IS COMPLETELY VOLUNTARY.
    THIS ASSIGNMENT IS NOT PART OF OUR REQUIRED COURSE CONTENT.
    This assignment has a total of 100 points. 15% of these points can be added to any ONE of the exams.
    For instance #1: Let’s assume you received 100 on this assignment. Then, you can add 15 points to any ONE of your exams.
    For instance #2: Let’s assume you received 80 on this assignment. Then, you can add 12 points to any ONE of your exams.
    For instance #3: Let’s assume you received 60 on this assignment. Then, you can add 9 points to any ONE of your exams.

     

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