FINC6010 Derivative Securities Assignment
2023
FIN金融作业代做 You have the flexibility to allocate part or all your capital to trade. Explain how your derivative portfolio is constructed.
Due time for submitting the assignment report is 23:59 pm, 10 May, 2023. The deadline cannot be deferred further. If you or your team want to ask for special consideration, please contact the student center for formal approvals.
Upload your assignment work in Word format (.docx) or pdf format (.pdf) from “Assignments” tag on Canvas.
CME Group is the world’s leading derivatives marketplace. The group has four exchanges, CME (Chicago Mercantile Exchange, established in 1848), CBOT(Chicago Board of Trade), NYMEX (New York Mercantile Exchange) and COMEX(The Commodity Exchange). These four exchanges offer a wide range of trading benchmarks for all major asset classes.CME Group’s website (https://www.cmegroup.com/) provides comprehensive information on derivatives trading and can be used as the major information source of this assignment. FIN金融作业代做
Student teams from University of Sydney’s FINC6010 course are going to investigate derivative securities trading using the trading simulator provided by CME. The simulator can be accessed after registration (free) and login (see following link). Initially, each trading team will have $100,000 to trade but you do not need use all the amount. For Question 7, each trading team may assume certain amount of currency within the equivalent $100,000 limit.
https://www.cmegroup.com/trading_tools/simulator.html
The investigation report should be in a Questions/Answers format (you don’t need a cover page, executive summary, introduction etc.), answering the questions listed below in sequence. The report does not need a separate cover page.
The 10-page report should include everything the student team wants to report. The submitted report should not be more than 10 pages. FIN金融作业代做
“Everything” means student traders should not send an enquiry email, asking whether certain items are included in the 10-page limit. The answer is always – yes included.
Please provide some screenshots at the end of your report to show your actual trading practice. Reports without any trading evidence will incur 5 marks penalty. Student(s) sending in emails, asking whether an item is included in the 10-page limit,will incur 3 marks penalty.
You or your team do not need send group formation information by emails. Put student IDs and student names of your team on the first page of the report. For each team, only submit one document and once. Please put “(submitter)” after the submitter’s name. FIN金融作业代做
For example: Green Soros (submitter), SID 123456; Walsh Buffett, SID 234567;Jack Rogers, SID 345678.
Example for one-person team: Joe Soros (submitter), SID 987764.
The report can use charts, tables, calculations, screenshots, or references (cite sources) for explanation purpose. There is no font size or line spacing constraints if others can read your report. Try to summarize the information and write the report within the 10-page limit.
Marks: 1 mark for question 2; 3 marks each for questions 4, 5, 6, 7; 4 marks for question 8; and 2 marks each for other questions (25 marks in total).
Login and open the CME simulator using your practice account. The questions are as follows. FIN金融作业代做
1.We saw the Fed increase its policy rate to 4.25%-4.50% in 2022, hiking seven times in eight meetings in an attempt to clamp down on inflation. Based on guidance,a peak federal funds rate between 4.75% and 5.50% seems likely to be achieved at the March 22 FOMC meeting, although a delay is possible. The resulting risk management needs were significant for participants to CME Group. Investigate and report the price quotation method of the 3-month SOFR contracts. How to use the 3-month SOFR contracts to hedge against an increasing interest rate if you are a borrower?
2.Click on “Equity Index” tag and we can find E-mini S&P 500 Index and E-mini S&P MidCap 400 Index. What does “E-mini” mean and what is the contract size of E-mini S&P MidCap 400 Index futures on the trading platform?
3.Examine the available futures contracts for E-mini S&P MidCap 400 Index futures. They have the contract codes such as EMDH3, EMDM3, EMDU3 and EMDZ3. Your task now is to decipher these codes. Please explain the meaning of(or rules to construct) contract codes for E-mini S&P MidCap 400 Index futures.What are the contract code and the associated settlement month for each available E-mini S&P MidCap 400 Index futures in year 2030?
4.The trading desk manager wants you to long one MESM3 futures contract with a market order. FIN金融作业代做
The manager did not tell you the underlying asset. Please report what is the underlying asset for MESM3 contract. Provide screenshot(s) to show how you conduct the transaction to establish the long position. Hold your position for 1trading day. After 1 trading day, try to liquidate your position and obtain larger than $5 profit. It may take some time. You may provide screenshot(s) to show how you did it. If your screenshots are too large, then use your computer skill to modify them to fit in your report.
5.Global prices for food commodities like grain and vegetable oils were the highest on record last year even after falling for nine months in a row, the U.N. Food and Agriculture Organization said, as Russia’s war in Ukraine, drought and other factors drove up inflation and worsened hunger worldwide.
Click on “Agriculture” tag and these are agricultural grain derivatives. Use trading simulator chart to compare futures prices of Wheat and Corn, both with July 2023 delivery. Present your comparison in one chart. You may use 3-month (3m) or 6-month (6m) time windows. And summarize the price performance of Wheat and Corn in your chart and communicate the key findings from comparison to your trading desk manager.You need figure out the “key findings” by yourself. FIN金融作业代做
6.Suppose you work for an Italian fast food chain company. You need to import grains from overseas every year. The derivatives (both futures and options) of wheat and corn are quoted in U.S. dollars. Thus, foreign exchange exposure is also a key concern for your company. Click on “FX” tag and these are foreign exchange derivatives. Go to “Euro FX” panel and look at the quoted price. How is euro quoted?If the quoted price is 1.09035, what does it mean? Now check the option series(Select “OPTIONS” at the upper right corner) on futures contract 6EM3. Explain which call and put options are closest to be at-the-money and how do you figure out the answer (provide screenshots if necessary).
7.Again, you work for an Italian fast food chain company and your company needs to purchase wheat in the spot market in July 2023.
Using future contracts in the CME trading simulator, design and implement a trading strategy to hedge against the risks that your company may face. You have the flexibility to allocate part or all your capital to trade. Explain how your derivative portfolio is constructed. What are the main risks that your company wants to mitigate with? Discuss whether your planned 4trading strategy fully mitigates the risks associated to the wheat purchase.
8.Implement a trading strategy by writing one call at a lower strike price, buying two calls with a higher strike price, and writing one call with an even higher strike price on the NQM3 future contracts. All calls have the same expiration date, and the strike prices are equidistant (e.g., writing one call with strike price=10, buying two calls with strike price=20, and writing one call with strike price=30). You need to open and close (within 10 trading days) the long and short positions in call options simultaneously (a short time lag is allowed). FIN金融作业代做
Monitor and record the daily profit/loss from this trading strategy and taking screenshots of your positions’ profit/loss.
Identify the underlying asset, strike prices, maturity date, and transaction time (open and close time) of option contracts. To construct this strategy, how much do you need to pay (or receive) initially? Under what circumstances, we are making profit from this strategy and why.
9.Click on “FX” tag and these are foreign exchange derivatives. Go to “Australian dollar FX” panel and now check the option series (Select “OPTIONS” and“MONTHLY OPTIONS” at the upper right corner) on futures contract 6AM3. Use screenshots to identify one in-the-money (ITM), one at-the-money (ATM), and one out-of-money (OTM) put options, respectively. Which one is the most expensive contract? Can you provide some economic intuition about the price difference among these three contracts?
10.Go to “FX” tag and these are foreign exchange derivatives. Are future prices on“Australian Dollar FX” and “Japanese Yen FX” highly correlated? How do you know?
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