Assignment:
Type of Service
Assignment With Calculations
11 page(s)/3025 Words
Style Harvard style Destailed Description
In answering the questions below you should submit TWO documents:
a. A Word or PDF document where the questions are answered (report) and,
b. An excel spread sheet with the data collected and your workings.
The overall word limit for questions 1 to 3 is 2,000 words, excluding cover page and references page, but including any appendix you might add.
The cut-off date, for the portfolios (Question 1 to 3) is April 12th. This is the date that must be used to assess/report performance achieved.
The short essay (question 4) word limit is 1,000 words.
Question 1
Your client wants you to produce a set of minimum variance and efficient portfolios with and without short selling restriction; using any 20 stocks of your choice. Your cash balance is £500,000.
Instructions:
1. Portfolio Construction
a. Collect the closing monthly share prices for 61 months for 20 companies from your choice (e.g. Datastream, Eikon, Bloomberg, yahoo finance, etc).
b. Derive the minimum variance frontier for various levels of expected returns, without shortselling of risky assets
c. Derive the minimum variance frontier for various levels of expected returns with restricted short-selling (apply whatever restriction you consider appropriate) of risky assets allowed.
d. Plot those two minimum variance frontiers.
e. Produce a client report explaining your workings and findings.
f. Critically discuss the problems associated with short-selling.
2. Performance
Regarding your efficient portfolio (you should select one portfolio from the alternatives produced) analyse your risk/return performance against an appropriate benchmark (justification of the benchmark should be provided).
Question 2
You have the mandate to construct an Investment Fund. The initial cash balance is £500,000 that you can use in total or partially. In your report you have to:
a. Define the Investment objective and policy (strategic asset allocation risk profile, benchmark, constraints, etc.)
b. Explanation of the rationale behind the portfolio construction
c. What are the characteristics and composition of your portfolio? Why have you structured in this way?
d. Analyse your risk/return performance against an appropriate benchmark (justification of the benchmark should be provided). It is expected the use of risk adjusted performance measures e.g. Sharpe ratio).
Question 3
You are a hedge fund manager. The initial cash balance is £500,000 that you can use in total or partially. In this task you should apply any of the long/short Portfolio Construction Techniques discussed (Market Neutral, Portable Alpha (Equitised) portfolio or Hedge Strategy). In your report you should clearly explain the rationale behind the portfolio construction and its composition, how your strategy is implemented, benchmark used and theoretical payoff.
The overall word limit for questions 1 to 3 is 2,000 words, excluding cover page and references page, but including any appendix you might add.
The cut-off date, for both portfolios (Question 1 and 2) is April 12th. This is the date that must be used to assess/report performance achieved.
Question 4
Many observers think that the Bank of England will raise the base interest rate in the next 18/24 months. Explain what could be the motivations and effects of such a policy on the UK economy and how this decision can be affected by Brexit.