Options, Futures and Risk Management

In: Business and Management

Submitted By wxs901225
Words 2147
Pages 9
BFF9515 Options, Futures and Risk management
Group assignment
Semester 1, 2014

Due date: 16.05.2014

BFF5915 Group Assignment
Part 1 1. Compute Beta * Method:
First, compute the returns of each stocks and the return of the index. They can be calculated using excel with the formula: (current price / the previous price) – 1,
Second, use covariance and variance function in excel to calculate the beta of each stock.
Third, multiply each beta with the corresponding weight to calculate the portfolio beta. * The beta for each stocks and the beta for portfolio (see table 1.1)
Details can be seen in sheet “EquityReturnData” in the data file “Data.xlsx”.
Table 1.1 The Beta(s) of Stocks and Portfolio Name | Code | Weight | Beta | CROWN RESORTS | 51333T(RI) | 7.25% | 0.8039 | COMMONWEALTH BK.OF AUS. | 314054(RI) | 7.26% | 0.8950 | NATIONAL AUS.BANK | 901842(RI) | 3.74% | 1.1317 | COCHLEAR | 871051(RI) | 3.96% | 0.8402 | WESTFIELD GROUP | 912307(RI) | 2.56% | 0.7096 | TELSTRA | 871685(RI) | 4.60% | 0.5050 | MACQUARIE GROUP | 865438(RI) | 4.36% | 1.4238 | INVOCARE | 28047X(RI) | 3.87% | 0.7210 | FLIGHT CENTRE TRAVEL GP. | 871048(RI) | 4.28% | 1.0063 | CSL | 131775(RI) | 4.89% | 0.6488 | SLATER & GORDON | 50509L(RI) | 4.79% | 0.3001 | JB HI-FI | 27736M(RI) | 4.50% | 0.8261 | CARSALES.COM | 67967W(RI) | 4.54% | 0.8459 | WOOLWORTHS | 322714(RI) | 4.86% | 0.5500 | FORTESCUE METALS GP. | 314160(RI) | 7.15% | 1.8687 | The Portfolio Beta | 0.6552 | * The beta of the portfolio is 0.6552, which is less than 1. It means the risk of the portfolio is less than market risk. 2. Compute the number of contracts * Choose the maximum portfolio loss:
Considering the beta of the portfolio as well as the expectation of drop in the market in March, we decide that the maximum portfolio loss level is 5%. * Identify the…...

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