Assignment Detail:- BAFI1026 Derivatives and Risk Management - RMIT University
Assessment Part - Report and Excel
In this assessment, students are required to use the Trading Simulator tool from CME Group to trade on future products to hedge risk and/or take advantage of speculation-In the #2 trading session, you will focus on Equity Index future products-
The goal of this individual assignment is to gain a better understanding of the future market and risk management process, by testing and refining your trading strategies-
Below are the steps you need to follow to accomplish the task:• In weeks 3, you have enrolled in the trading session from your timetable system- Check the session you enrolled in from the following7slots and attend your selected trading session via Canvas in week 8-• Attend your selected live dealing session in Week 8- Use the GME Group account created in Week 5-• Your instructor will use 1-5-2 hours to go through the task, elaborate the basic specs of Energy future products, explain the trading rules and demonstrate how to trade- You can start trading after instructor's demonstration-• Your trading aims to hedge your risk exposure to the stock market risk as well as generating short-term profit- For student whose student number end with odd number, assume you hold a S&P 500 index fundworth $1,000,000 on the trading session day- For student whose student number end with even number, assume you hold a Nasdaq 100 index fundworth $1,000,000 on the trading session day- You aim to use Equity index future products to hedge your price risk-• You also have $100,000 USD cash on hand at the beginning of your trading- You must use at minimum 50% of your account balance to hedge your stock price risk- Meanwhile, you are allowed to have up to 50% of your account balance to speculating/arbitraging, and the speculation/arbitrage products are not limited to Equity Index futures -e-g-, you can even use Crypto futures to earn short-term profit, but also mind the potential loss--• Please reset your game from GME Group simulator before your Part 2- Then you can trade any timeafter your instructor's demonstration, till the end of Week 9, 23:59 Friday, 6thMay 2022- You can trade as many times as you want, as long as you can justify your trading philosophy- You can do some trials at the beginning of the trading period to get familiar with the platform- When you decide to officially start to implement your strategy, please do not reset the game before 23:59 Friday, 6th May 2022-• You can take both long and short positions in the future contracts- Your orders might be rejected by the system because of margin shortage or market close- When your account balance drops to near zero, you are basically out of the game-• It is strongly encouraged to use the template to record your trading and balance on a daily basis, or whenever you make a trade-It is not necessary to flatten -close out- all your open positions- It is also a good practice to keep a record on your daily account balance, profit and loss as well as open positions, to facilitate consolidating your report-• Based on your trading history, profit/loss from your futures account, and the income/cost from your physical asset, you need to form a report to summarize your trading exercise-Note: Since the contracts can't be bought in fraction, a tiny variation from the specified budget is acceptable- You can choose to hold some Cash if you believe the investment opportunity is not good enough, but also need to justify this decision in your report-
- CME Institute Trading SimulatorTrading Simulator replicates live futures markets by leveraging real market data- A constant stream of new prices informs your strategies for CME Group's top products across all 6 asset classes, including Bitcoin and Micro E-mini futures- The Access to the simulator is free, all you need is a CME Group Login account- Please create an account before trading-
- Marking GuideYour report must include the following sections:
1- Trading objectives: Give an overview of your trading objectives-
2- Summarize your hedging strategy Provide a summary on how you use Equity Index future products to hedge your stock market price risk- The content should include but not limited to:• How much percentage do you hedge your portfolio???? And why????• Which future product-s- you use to hedge your risk, outline their basic specs????• What strategy you employed to hedge -e-g-, delivery month, contract price, contract amount, long or short, etc-????• What is the performance of your hedging by the end of Friday, 6th May 2022???? And how the spot price change for your fund holding????
3- Summarize your speculation tradingProvide a summary on how you use future contracts to speculate/arbitrage during your trading period- The content should include but not limited to:• Do you think the 50% limits allocated on speculation is too high???? And why???? Do you feel speculation is risky from your trading exercise????• How the speculation performed and explain your profit/loss????• How your speculation strategy differs from last time -Trading session 1-????• How you feel when you experience losses from the speculation????
Attachment:- Derivatives and Risk Management-rar
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