Financial investment
In the third part, choose at least 1 option contract. The option can be a hedging position or a purely speculative position or both. If it is used for hedging, demonstrate how the position protect value of the overall portfolio. If the option position is speculative, explain your rationale and justify the investment .
Backtest the portfolio using stock prices from 4th October to 6th December 2021, how did the portfolio perform against a chosen benchmark? What is return and risk of the portfolio?discuss which portfolio performs better during the back testing period, the benchmark or your portfolio? Explain in detail why the portfolio performs better (or worse) than the benchmark. Bloomberg portfolio management function (PORT) can help with this task.
As a quality assurance, present a scenario analysis to the client. Hypothetical analysis of the portfolio if a crisis (in scale similar to COVID-19 or the 2008 crisis) strikes. Is your portfolio crisis proof? Why? If not, how can you reduce exposure to a financial crisis. Analysis do not need to be quantitative, discursive discussion is fine.
