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I need help doing my assignment on my risk management assignment. everything is
I need help doing my assignment on my risk management assignment. everything is attached below.
Requirements:
You must use Excel to complete this assignment. You will submit both the Excel file and the report. The report needs to be typed and presentable. The report must address each of the tasks below. Do not restate the questions in your report. Your report has to be understandable as a stand-alone piece of work without referring to the Excel file. You can include the graphs/ tables/ from Excel to address the questions, but do not details the process of how you create them. The process will be visible in the Excel file.
In the Excel files, you need to labelled the questions clearly. Tables and graphs need to be carefully labelled.
If you do not submit the Excel file, you will automatically lose 50% mark of all calculation tasks. Calculation tasks that are not visible in Excel will also lose 50% mark automatically.
Data:
The uploaded Excel file contains data for your assignment. Sheet1 contains time series of different indices. Sheet2 contains the details and time series of futures prices of different contracts. Sheet 3 contains details about different positions and the corresponding futures used to hedge these positions. Sheet 4 contains different pairs of FX spot and forward contracts.
Tasks:
Construct the monthly simple (or discreet) return series and continuous (or log) return series on your assigned index (Excel sheet 1). Calculate summary statistics and construct a histogram for both return series. Base on your descriptive statistics, are the return series normally distributed?
(20 marks)
Assuming that you enter the assigned position of your futures contract on day 0 (Excel sheet 2) at the given future price on day 0. The maintenance margin is 75% of the initial margin. Given the changes in futures price starting from day 1, create a table illustrating the marking to market feature of the futures market. Record your daily and cumulative gain/loss on your position as well as your balance until the contract expires. Incorporate all the margins in your table. (20 marks)
Given your calculations in 2. will you keep the position until the end or exit it early? Explain how you could exit your position and the reasons for exiting. (10 marks)
Given your assigned position and the corresponding futures used for hedging (Excel sheet 3): Compute the correlation between the two time-series. Is the futures contract a good hedge for your position?
(5 marks)
Compute the gain/loss in both positions and compute basis risk. (8 marks)
Compute the optimal hedging ratio. Explain the meaning of your computation result.
(7 marks)
Given own spot FX rate and other data (Excel sheet 4): Compute the theoretical forward price for a 3-month forward contract on the foreign currency.
(2 marks)
Given the observed forward price, describe step by step how you can exploit this arbitrage opportunity. Record all the transactions and the final arbitrage profit. Ignore any transaction costs.
(18 marks)
After completing the above tasks, critically reflect on the experience you had by doing this task, addressing the challenges that you have faced, how would you overcome them I the future, how the above exercises can be applied to real life problems and how it will enhance your personal skills.
(10 marks)
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