Risk Management Assignment
BAFI 1026 Risk Management – Group Assignment -Consulting Report Due Date: Friday 9th October Week 11, 11:59 PM (Melbourne Time) Weighting: 30% Task Overview Your team works for a renowned consulting firm specializing in financial markets and associated risk management. Recently, your team has been assigned to two projects regarding interest rate products and foreign exchange market trading respectively. Your team are invited to help clients to form and implement the strategy in achieving their specific objectives. At the end of each project, your team is required to provide a report and present to client’s management. The report needs to address the issues faced by the client as mentioned in the case, covering at least following points: 1. Outline the trading strategy that you planned to achieve the objectives. Your answer could include but not limited to the following points: · Explain the trading strategies in detail · Demonstrate which interest rate products or currencies you will buy or sell to achieve your trading objective. · Demonstrate what rate level you will quote or accept? 2. Explain the transactions you made, in this section, you may include the following points: · How does each transaction contribute to achieving the trading objective? · How did you decide the actual price for every transaction? · Can you implement the planned strategy smoothly? · What are the key learnings in executing your trading strategy? 3. Analyse the profit and loss of your trading. Project Distribution You will receive your 1st project in early Week6 and 2nd project in Week8 in your project group registered on Canvas People. You are required to attend week6 and Week 9 trading simulation session to trade with your classmates in order to provide the report for the projects. Report Formatting The assignment must be Word-processed, using Times New Roman, 12 Font, double-spaced for the main text, and single spaced for tables, figures & appendixes. The word limit is 3000 words in total for two projects, excluding tables references & appendixes. How to write report: How to Write a Consulting Report.doc Submission 1. To submit the consulting report, students are required to sign up their groups online via Canvas. The detail steps can be found in the announcement. 1. Go to the course site on Canvas. Submit your assignment under the Assessment 2 submission point under Assignment Tab. Only one submission is required per group. 1. The assignment must be Word-processed, using Times New Roman, 12 Font, double-spaced for the main text, and single spaced for tables, figures & appendixes. 1. The report must have the university prescribed cover sheet and the following details: · Students names and student numbers · Class attended · Team name · Details of the course 1. By signing the cover sheet student acknowledges that they have verified and authorized the submission of the group assignment. 1. Marks MAY be deducted if all requirements and submission instructions are not completed. Academic integrity In order to ensure the academic integrity of your submission and to deter others from copying your work, your submission will be processed through a text-matching software. Turnitin will provide a similarity report of your submission against a large database of academic and professional documents. If your submission’s similarity report is above 35%, you will receive a mark of zero and you will be referred to the academic disciplinary committee. Further information can be found here 2 RMIT Classification: Trusted School of Economics, Finance & Marketing BAFI 1026 MM Dealing Simulation Case 2 Project group #: ______________________ Student name Student Number Student1 Student2 Student3 This is the 1st project assigned to your team. Your team is required to help clients to form and implement the strategy in constructing and managing a portfolio to achieve the specified objectives. Portfolio Objectives · Risks to be kept within moderate levels · Optimize returns consistent with objective 1 Current holdingsFace Value (AUD) Cash50,000,000 Bank bills 30 days0 60 days0 90 days0 120 days0 150 days0 180 days0 Bonds CGS – 5.75% 15.05.20210 CGS – 5.75% 15.07.20220 CGS – 5.50% 21.04.20230 CGS – 4.75% 21.04.20270 CGS – 3.25% 21.04.20290 CGS – 4.50% 21.04.20330 Market rate/yields Table 1: Bank bill and Australian Commonwealth Government Bonds (ACGB) bond rate Aug.11, 2020. Mid-rate = (bid rate + ask rate)/2 Benchmark Rates (%) Bills Bid Ask Mid BB30 0.1000 0.0800 0.0900 BB60 0.1000 0.0800 0.0900 BB90 0.1100 0.0900 0.1000 BB120 0.1400 0.1200 0.1300 BB150 0.1600 0.1400 0.1500 BB180 0.1800 0.16 0.17 Bonds ACGB – 5.75% 15.05.2021 0.2320 0.1930 0.2125 ACGB – 5.75% 15.07.2022 0.2810 0.2430 0.2620 ACGB – 5.50% 21.04.2023 0.2720 0.2500 0.2610 ACGB – 2.75% 21.04.2024 0.3020 0.2810 0.2915 ACGB – 3.25% 21.04.2025 0.3860 0.3680 0.3770 ACGB – 4.25% 21.04.2026 0.4850 0.4670 0.4760 ACGB – 2.75% 21.11.2027 0.6530 0.6340 0.6435 ACGB – 2.25% 15.05.2028 0.7120 0.6950 0.7035 ACGB – 3.25% 21.04.2029 0.7960 0.7830 0.7895 AUCG – 2.50% 15.05.2030 0.8630 0.8480 0.8555 ACGB – 4.5% 21.04.2033 1.0040 0.9780 0.9910 Trading rules 1. You may buy or sell any other of the money market securities or CGS listed that you need to achieve your objectives, but you must NOT issue debt to fund any acquisitions. 2. Short selling is NOT allowed. That is, you cannot sell any vehicle you do not have in your books. If at the end of the session you have an overall short position of more than 1 million AUD face value, you will lose 1 mark. 3. Deal size is limited to a minimum of 1 million and a maximum of 20 million. 4. Trade with central bank: when market lacks liquidity, you can trade with central bank (workshop instructor). You will be notified if this situation happens. 10 Team One School of Economics, Finance & Marketing BAFI 1026 FOREX Dealing Simulation Project group #: ______________________ Student name Student Number Student1 Student2 Student3 Case 18- Corporation Project Objectives This is the 2nd project assigned to your team. You are now helping a corporate treasurer of a major PETROLEUM producing company- a big responsibility. Your company has just raised USD 59m as a result of the sale of crude oil to a Dallas based company. Settlement is due in six months’ time. You also have AUD 260m in your bank account at the start of trading. Primary task: · You will be making a drilling rig purchase from Manchester, U.K within 30 days’ time and, as a result, are required to raise GBP 40m as cheaply as possible to fund this purchase. · Then, you are required to purchase JPY 2,511m to pay for a new hydraulic drive system from Toyo, Japan due in 180 days’ time. · You also need to raise EUR 67m to pay a supplier in Paris, France due within 90 days; Secondary task: Once your primary task is achieved, you may speculate. You must however be able to explain any speculative positions and remaining currency exposures to the board of directors at the end of the day! Market benchmark rate: Table 1: Exchange rates for Aug.17, 2020. Mid-rate = (bid rate + ask rate)/2 Comm / Terms Bid Ask Mid FWD Bid-fwd points Ask-fwd points FWD Bid-fwd points Ask-fwd points FWD Bid-fwd points Ask-fwd points AUD/USD 0.7184 0.7186 0.7185 1M 0.50 0.62 3M 1.49 1.76 6M 2.28 2.86 AUD/EUR 0.6052 0.6060 0.6056 1M -4.28 -4.08 3M -11.58 -9.85 6M -25.54 -23.41 EUR/AUD 1.6509 1.6520 1.6515 1M 9.78 10.30 3M 27.85 28.18 6M 61.78 62.78 AUD/GBP 0.5482 0.5487 0.5485 1M -0.89 -0.69 3M -3.07 11.27 6M -4.89 -4.12 GBP/AUD 1.8232 1.8237 1.8235 1M -2.55 5.37 3M -3.59 11.07 6M 1.80 24.13 AUD/JPY 76.50 76.62 76.56 1M -2.42 -1.79 3M -7.41 -6.29 6M -21.49 -20.34 EUR/USD 1.1864 1.1868 1.1866 1M 7.92 8.11 3M 22.84 23.14 6M 48.50 49.30 GBP/USD 1.3101 1.3162 1.3132 1M -7.13 1.72 3M 5.62 5.82 6M 13.15 14.05 USD/JPY 106.51 106.55 106.53 1M -4.16 -3.49 3M -12.00 -11.93 6M -32.68 -32.52 EUR/GBP 0.9055 0.9059 0.9057 1M 4.31 5.12 3M