FIN 4315 D ERIVATIVES M ARKETS 代写

FIN 4315 D ERIVATIVES M ARKETS

Winter 2017 (Section 01)

Individual Assignment – PART II

D ERIVATIVE T RADING S IMULATION

(Due Friday, March 10 th , 2017)

IMPORTANT INSTRUCTIONS:

This file contains the instructions for Individual Research Assignment – PART II

D ERIVATIVE T RADING S IMULATION . The individual research assignments should be

individually and professionally prepared. Note that there are two parts of Individual

Research Assignments. Part I (Derivatives Innovations) is provided in a separate

document (see Blackboard “Course Materials”).

ALL parts of the individual research assignments should be individually and

professionally prepared. All analyses and results must be original and based on your own

analyses and findings. Your reports (write-ups) must be individually and

professionally prepared.

Please complete ALL parts of the Individual Research Assignments, and provide your

discussions and analyses as clear as possible. Summary tables of statistics, quantitative

analyses, and qualitative discussions should be included in your report. Any reference

and source of information should be explicitly provided.

IMPORTANT REQUIREMENTS:

Individual Research Assignments should be your individual and original work. All parts

of the assignments must be prepared, worked, and completed all by yourself. No group

work and collaboration will be allowed for individual assignments. Failure to follow

these requirements may result a final grade of an "F".

You must complete the Individual Research Assignment by yourself and submit your

original answers to the following email: mba.finance.sfung@gmail.com by the due date.

IMPORTANT DATES (DEADLINES):

Due date of Individual Assignment Part II: Friday, Mar 10 th , 2017

IMPORTANT NOTE ON ELECTRONIC SUBMISSION:

Please submit electronic files of ALL parts of your assignments (including the reports

(write-ups), spreadsheet models, references, and other files) to the following email:

mba.finance.sfung@gmail.com

2

Important Requirements: Individual Research Assignments should be your individual

and original work. All parts of the assignments must be prepared, worked, and

completed all by yourself. No group work and collaboration will be allowed for

individual assignments. Failure to follow these requirements may result a final grade of

an "F".

See below or p.16 of the course syllabus for Policy on Academic Dishonesty.

Policy on Academic Dishonesty:

The University has a published policy on cheating and academic dishonesty. Students are

expected to be familiar with the policy and to abide by it. Cheating will result in:

1) a zero score on the test and the loss of all grading options; and/or

2) an "F" grade for the course; and/or

3) referral to the Academic Vice President for expulsion from the University.

The following statement and reference to University policies regarding cheating and academic

dishonesty:

By enrolling in this class the student agrees to uphold the standards of academic

integrity described in the catalog at:

http://www.csueastbay.edu/academic/academic-policies/academic-dishonesty.html

http://www.csueastbay.edu/ecat/current/i-120grading.html#section12

3

Individual Assignment – P ART II

D ERIVATIVE T RADING S IMULATION

Due: Friday, March 10 th , 2017

FIN 4315 features a derivative trading simulation, which provides experiential learning of

derivatives trading process and practical applications of different theories, tools, and techniques

of financial derivatives. Individual research assignment Part II is based on your original

analyses, strategies, findings, and learning outcomes of this simulation. This assignment will

provide experiential learning and applications of derivatives.

Each student will participate in a derivative trading simulation game using the StockTrak

simulation. The main learning objectives of derivative trading simulation include the following

experiential learning opportunities: (i) design, implement, and practice derivative trading

strategies with real-time financial market data and information; (ii) acquire new knowledge in

derivatives markets and apply derivatives theories, tools, and techniques covered in this course;

and (iii) financial decision making and skills in trading and applying derivatives.

This assignment and simulation will provide experiential learning and applications of

derivatives to achieve the following learning outcomes and objectives (see course syllabus): 1.

Derivatives Theories and Applications; 2. Financial Decision Making and Skills; 3. Creating,

Capturing and Reinforcing Important Values Using Derivatives; and 4. S.T.E.M. Learning

Outcomes.

A. INSTRUCTIONS ON THE REPORT AND PRESENTATION:

Prepare a 4-page minimum (1½-spaced paragraphs) report based on the derivative trading

simulation with your original analyses, trading strategies, findings, and applications of

theories and tools. Your discussions should be based on your original insights, your own

research findings, and your creative strategies based on derivatives theories and tools that are

covered in this course. Your report should be organized with the following interrelated steps:

(I) Statement of Objectives

(II) Investment Plan and Derivatives Portfolio

(III) Derivatives Trading Strategies and Analyses

(IV) Performance Evaluation

(V) Conclusion and Learning Outcomes

Your report should contain a systematic (step-by-step) approach to derivatives trading and

analyses, address ALL of the following steps, and answer ALL of the following questions:

4

Step (1) Statement of Objectives

State your objectives of derivatives trading and investment. Discuss your investment

plan to achieve these objectives.

State clearly all assumptions, sources of information, your own investment

philosophy, original insights, constraints, and proposed trading strategies.

Step (2) Investment Plan and Derivatives Portfolio

Design and construct your portfolios of derivatives and other investments. Outline

the steps and strategies of your derivatives trading. In order to achieve your

investment objectives in Step (1), what investments and derivatives trading

strategies did you propose, apply, and implement in the simulation? Importantly,

apply derivatives theories and tools to support your investments and trading

strategies.

Discuss any unique features of your derivatives trading strategies and overall

investment portfolio. Be original, specific, rigorous, and creative.

Importantly, provide theoretical arguments and analytical framework that support

your derivatives trading strategies and investment portfolio.

Important Instruction #1: In the StockTrak simulation game, your portfolios should

contain different types of instruments, including futures (on different underlying

assets), options (on different underlying assets), options on futures, and others such as

equities, indices, ETFs, commodities, bonds, etc. Important Note: Derivatives

(futures and options) should be the primary trading strategies in your portfolio.

In the StockTrak simulation game, you can trade assets from different global financial

markets, futures (on different underlying assets), options (on different underlying

assets), futures on options, equities, indices (ETFs), commodities, interest rates, VIX,

among others. 1

Important Instruction #2: During the simulation game this quarter, you should have

performed at least 20 different trades to experiment and demonstrate different trading

strategies.

Important Instruction #3: Your trading strategies should be backed by theoretical

concepts, data, analyses, and analytical tools learned from this course.

1 For example, you may also include trading (long/short) positions in equities and indices (ETFs) in

your portfolio, but make sure that your trading positions in the spot markets should be related to the

derivatives counterparts. For example, you may use information obtained from derivatives markets to

formulate trading positions in the spot markets.

5

Step (3) Derivatives Trading Strategies and Analyses

Construct and implement derivatives trading strategies based on your original insights, your

own analyses, and your applications of theories and concepts. Your report should address the

following questions and steps:

(i) Demonstrate at least 10 different types of futures or options trading strategies;

examples of derivative trading strategies include (but are not limited to) the following:

long futures, short futures, long call, long put, bull spread, bear spread, straddle,

strangle, butterfly spread, covered call, covered put, etc. Also, the underlying assets of

derivative contracts may include stocks, indices, VIX, commodities, interest rates,

currencies, among others.

(ii) Your derivatives trading strategies should be supported by quantitative analyses,

finance theories, and derivatives models (e.g., cost-of-carry models for futures, option

pricing models for options, implied volatilities, dynamic hedging (Greek Letters), etc.).

(iii) Provide real data, detailed quantitative analyses, and derivatives models (e.g.,

cost-of-carry models for futures, option pricing models for options, implied volatilities,

dynamic hedging (Greek Letters), etc.) to support your derivatives trading strategies.

Your report should include applications of option pricing models (such as the binomial

option pricing models or the Black-Scholes-Merton option pricing model), implied

volatility model, etc. Important Note: Provide explicit discussions of all of your

assumptions as clear as possible.

(iv) Explain the strategic timing of your trading strategies. Your trading strategies

should incorporate your knowledge and findings of recent news/events/developments

in the U.S. and global financial markets and institutions. Considerations include the

following: recent events/news/developments in various markets such as equities, oil,

commodities, emerging derivatives markets, financial innovations, changes in financial

market regulations, among others.

Step (4) Performance Evaluation

Present critical performance evaluations of your trading strategies and outcomes. Your report

should address the following questions and steps:

(i) Provide critical performance evaluations of: (a) the trading outcomes of your

derivatives trades and strategies; and (b) the overall performance of your investment

and derivatives portfolio. Assess and evaluate the outcomes of your trading strategies.

(ii) Provide summary tables that contain important information and statistics of: (a)

your trading positions; (b) trading outcomes and performance (including

profits/losses from trading futures/options and profits from exercising options (if

any)); and (c) overall performance of your portfolios (such as overall profits/losses,

FIN 4315 D ERIVATIVES M ARKETS 代写

rate of returns, Sharpe ratio, alpha, etc.). Important Note: It is important to show

detailed calculations and results of profits from trading or exercising options.

(iii) Evaluate the effectiveness of your investment and trading strategies in the

simulation. Highlight your “3 best” (most effective) trades and your “3 worst” (most

unsuccessful) trades during the simulation. Discuss whether your trading strategies

can generate (if any) superior performance or arbitrage opportunity. Discuss whether

your strategies and outcomes are consistent with any derivatives theories / models.

Step (5) Conclusion and Learning Outcomes

Provide a concluding section, which summarizes your new insights, original findings, and

learning outcomes of this project. In the concluding section, discuss all of the following:

(i) Key findings of your report; and

(ii) Major lessons and learning outcomes from this simulation game (such as new

ideas, concepts, implications, and other important lessons from this derivatives

trading simulation) and important skills you have acquired from this assignment

and simulation.

Your conclusion should cover all of the following: What are the major learning outcomes and

lessons from this derivative trading simulation? How do you incorporate your new knowledge

of finance and derivatives into your trading strategies? Do you become a better investor? Do

the theories apply well to your simulation? What other factors should be considered in real

world derivatives trading and investment management?

B. INSTRUCTIONS ON DERIVATIVES TRADING SIMULATION:

To register into our simulation game, please go to the following link, which will

automatically direct you to the registration page for our class code.

http://www.stocktrak.com:80/members/registerstudent?className=FIN4315WINTER2017

You may also register from the home page of StockTrak (http://www.stocktrak.com/)

by clicking on the "students register here" button and inputting "FIN4315WINTER2017"

as the class name.

The following links are useful to become familiar with StockTrak:

FAQ: http://content.stocktrak.com/student-faq-technical-support/

My Portfolio: http://stocktrak.com/account/openpositions

Futures: http://stocktrak.com/trading/futures

Options: http://stocktrak.com/trading/options

Futures Options: http://stocktrak.com/trading/futureoptions

How to Trade: http://stocktrak.com/research/videocenter

7

Checklist and Important Instructions: Options Trading Simulation

(I) The followings provide useful research materials for your derivatives trading simulation -

see: (http://www.cboe.com/);(http://www.cboe.com/data/AnnualMarketStatistics.aspx)

(II) Make sure that you keep regular records all of your trading positions in your portfolio

(important suggestion: keep regular records of all your trading positions at least once a week).

(III) Important information and instructions regarding option trading in simulation: note that

there are two possibilities to make profits: Profits from option trading OR Profits from

option exercising (BUT NOT BOTH). You may choose either:

OPTION (1) Profits from trading options “before expiration”. In this simulation, you can

create profits from trading (buying/selling) options. Before expiration of the option contracts,

you may make profits from selling existing option contracts that you already had.

OR

OPTION (2) Profits from options “at expiration”. Alternatively, you can hold your option

contracts until expiration; the StockTrak simulation system will settle the contracts in cash. 2

OR

OPTION (3) Profits from early exercising options “before expiration”. You can create

profits from early exercise of options. In this case, you will need to take the following steps:

First, contact StockTrak using the form at the bottom of the “FAQ” page with your

username, the option code and number of contracts you would like exercised (note that

position limit rules and buying power limitations come into play when exercising

options). See http://content.stocktrak.com/student-faq-technical-support/ and choose “Q:

HOW DO I EXERCISE OPTIONS?”

Second, to help your decision on early exercise of options, you will need to compute any

profits of early exercising options by yourself. To calculate any profits from early

exercising options, you can use the Excel model provided in Blackboard. 3

Third, when exercising any options in your portfolio before expiration (if you decide to

have “early exercise” of options as in OPTION (3) above), please send me an email

reminder to (mba.finance.sfung@gmail.com), which provides a record of the date/time

and other information related to your option exercise. The information should include:

(A) The date/time of option exercise;

(B) The information of option contracts you exercised (e.g., options on “SPY”

with information of the strike price, maturity date, etc.);

(C) The number of contracts in your trading transaction (you can obtain this

information from your trading record in StockTrak);

(D) Estimated profits from early exercising the options (important note: use the

Excel model at Blackboard to calculate profits from option exercise).

(E) Any other relevant information related to your option exercising strategy.

You should send me this email (“notice of early exercise of options”) as soon as you has

decided to exercise the options before expiration.

2 If you have an in-the-money option at expiration, your profitable option contracts will be

automatically closed out at expiration. This is similar to a procedure in practice known as “exercise by

exception”.

3 As mentioned, there are two possibilities to make profits: Profits from option trading (OPTION

(1)) OR Profits from option exercising (OPTION (2) (BUT NOT BOTH OPTIONS) – e.g., if you

choose OPTION (2) to have early exercise of an option contract, you should not include any additional

profits from trading (selling) the same option contract (as in OPTION (1)) after exercising the option.

8

C. Checklist: Completing the Report:

Overall, the report should be based on your own insights and understanding of theoretical

concepts and your applications of finance theories and tools learned from this course.

Your discussions should be based on your original findings and creative trading

strategies.

Your strategies should demonstrate the applications of theoretical concepts, derivatives

models, and analytical tools learned from this course.

Summary tables/figures of statistics, financial models, and quantitative analyses (e.g.,

explicit spreadsheet analyses) should be explicitly included in your report.

References and appendices that include additional data and information should be

included in your report.

D. Important Note and Evaluation Criteria:

All analyses and discussions must be original, well-organized, well-written, and integrated

with analytical frameworks and summary tables/figures of results. Explain all your

assumptions, calculations, and ideas as clear as possible. Construct and simulate derivatives

trading strategies based on your original insights and understanding of derivatives markets.

Apply different trading strategies and make sure your portfolio includes trading positions in

futures, options, equities, and other investment assets. Original findings, rigorous analyses,

critical thinking, innovative methods, and insightful discussions are highly valued. Summary

tables of statistics, financial-quantitative analyses and qualitative discussions should be

included in your report.

Your individual research assignment will be critically evaluated based on: (I)

Originality, rigor, and completeness of your original analyses and original findings; (II)

Theoretical applications, qualitative insights, practical implications, and creativity of

your trading strategies; (III) In-depth understanding of the derivatives markets, insights

of the important concepts and frameworks of derivatives, and incorporations of the

recent trends and developments in the derivatives markets; and (IV) Your learning

outcomes and demonstrations of successful applications of theoretical concepts,

analytical tools, and financial-quantitative analyses learned from this course.

Have an enjoyable and productive trading-learning experience.

FIN 4315 D ERIVATIVES M ARKETS 代写