MSc Finance and Investment Module Quantitative Finance and...

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MSc Finance and Investment Module Quantitative Finance and Financial Markets Assignment Title QFFM Written Coursework Assignment (100%) Assignment Type Individual Assignment Word Limit 3,...

MSc Finance and Investment
Module	Quantitative Finance and Financial Markets
Assignment Title	QFFM Written Coursework Assignment (100%)
Assignment Type	Individual Assignment
Word Limit	3,500 (+500 words max allowed)
Weighting	100%
Student Cohort
Issue Date	11^th Dec 2012
Submission Date	30^h Jan 2013
Feedback Date	TBC
Internal Verifier
Plagiarism	When submitting work for assessment, students should be aware of the LSBF guidance and regulations in concerning plagiarism. All submissions should be your own, original work. You must submit an electronic copy of your work. Your submission will be electronically checked.
Harvard Referencing	The Harvard Referencing System must be used. The Wikipedia website must not be referenced in your work.
Learning Outcomes	On successful completion of this assignment you will be able to: Design and apply quantitative tools in financial markets Critically evaluate the changes that might occur if certain assumptions in the models used are changed Compute basic valuation analysis for financial markets instruments Evaluation of the inputs variables and their outputs in the use of quantitative tools in financial markets Synthesis and evaluate findings and present same in a professional manner to a varied audience

Grading Criteria

Grading criteria is available at the end of this document.

Your Task

Answer should be provided as a report writing

PART A

What factors are responsible for the recent surge in international portfolio investment (IPI)? (10 marks)

Security returns are found to be less correlated across countries than within a country. Why can this be? (10 Marks)

Explain the concept of the world beta of a security. (5 Marks)

Explain the concept of the Sharpe performance measure. (5 Marks)

(Total 30 Marks)

PART B

A commodity trader believes that average volume of wheat he traded can be described by a Normal model with a mean of 32,000 metric tons and standard deviation of 2,500 metric tons.(Total marks 25marks)

If a client buys some bushels of his wheat, would it be reasonable for the client to hope that the transactions will reach 40,000 metric tons? Explain. (5 marks)

Approximately what fraction of the transactions can be expected to reach less than 30,000 metric tons? (5 marks)

Approximately what fraction of these trades can be expected to reach between 30,000 and 35,000 metric tons? (5 marks)

Estimate the IQR of the trade volumes. (5 marks)

In planning an investment strategy, the commodity trader wants to offer an opt-out guaranty (or an option to cancel a trade) to any customer whose transaction volumes failed to deliver an agreed volume of transaction compared to the mean. However, he does not want to take too big a risk. If he is willing to give transaction refunds to no more than 1 of every 25 customers, for what volume level of transactions can he offer an opt-out guaranty? (5 marks)

In 1999, Lehman Brothers estimated that 48% of its investment bank traders took diverse forms of soft drugs. Based on these data, Lehman established a Drug Eradication Plan goal of reducing that figure to 16% by the year 2010. To that end, they hoped to achieve a reduction to 20% by 2006. In 2006, they released a research study in which 23% of a random sample of 1,815 traders said they were currently addicted. Is this evidence that progress towards the goal is off track?
(Total marks = 20 marks)

Write appropriate hypotheses. (5 marks)

Verify that the appropriate assumptions are satisfied. (5 marks)

Find the p-value of this test. (5 marks)

Explain what the p-value means in this context and set an appropriate conclusion - Of course, your conclusion may be incorrect and if so which kind of error did you commit? (5 marks)

Of all the CEOs in the Citibank, Walter Wriston had the highest
disapproval
rating from the internal bankers near the end of his mandate. His disapproval rating was the highest at 66% in May 1973 during the oil crisis, before he resigned. In May 2007, Charles Prince’s disapproval rating was 63%, according to an internal poll of 1,000 internal bankers. Bank experts started discussing whether Charles Prince’s rating was still discernibly better than that of Walter Wriston’s. What do you think? (Total marks = 15 marks)

A start-up company has developed an improved electronic chip for use in algorithm trading equipment. The company needs to project the manufacturing cost, so it develops a spreadsheet model that takes into account the purchase of production equipment, overhead, raw materials, depreciation, maintenance, and other business costs. The spreadsheet estimates the cost of producing 10,000 to 200,000 chips per year, as seen in the table next.(Total marks = 10marks)

Develop a regression model to predict
Costs
based on the
Level of Production
and compare it to the dispersion obtained from the table above. (5 marks)

Re-expressing each variable based on logarithm, establish the new regression model to predict
Costs
based on the
Level of Production, graph and analyse your new findings. (5 marks)

Guidelines

Please read all questions and information provided carefully. Answer should be made in appropriate length keeping in view the requirement of each question and total word counts allowed.
In addition, your assignment should demonstrate the following qualities:
A critical appreciation of relevant literature and its use to support argument, substantiate calculations and other aspects of the assignment.
Taking ownership of the content, being prepared to debate and argue a personal position, and providing evidence of evaluative skills. A submission made up of extracts from published sources which is descriptive or simply just theoretical regurgitation is not acceptable. Your submission must have interpretation and consideration of the challenges and issues of taking theory into practice.
Logical flow of ideas and treatment; appropriate selection of real world factors related to the companies under scrutiny.
Evidence of additional personal research, and the ability to analyse material from a variety of appropriate relevant perspectives.
Presentation, structure, appropriateness of methodology, breaking into section headings/subheadings, tidiness.
Marks will be awarded for proper referencing and originality of work. Also note that plagiarism is a serious offence and your submission will be electronically checked.
Your report must be handed in electronically no later than given date of submission.

Grading Criteria

Criteria	70%-100%	60-69%	50-59%	0 to 49% Fail
Generic skills: communication and presentation.	Comprehensive and correctly structured assessment. Style of writing is very fluent and develops a coherent and logical argument. Excellent referencing.	Well structured report which follows appropriate format but some aspects of layout and referencing could be improved. Style of writing is fairly fluent. Good referencing.	Good report in most aspects but suffers from variations in quality and the layout contains some inadequacies. Style of writing is satisfactory. Referencing needs improving.	Very poor report which is incorrectly structured and contains major errors and omissions. Style of writing lacks coherence and fluency. Poor referencing.
Knowledge & Understanding	Demonstrates excellent knowledge of theory and provides critical theoretical underpinning. Very good interpretations and summarising of main themes.	Wide range of knowledge demonstrated and evidence of good understanding of the topic. Ability to interpret and summarise succinctly.	Good range of knowledge demonstrated but weaknesses in key areas. Some understanding displayed of the topic. Summary and interpretation are satisfactory.	Very poor range of knowledge demonstrated and there are major weaknesses evident in interpretation and understanding. No clear interpretation of main themes.
Analysis	Excellent use of theoretical and conceptual models to guide analysis linked with a critical discussion of main themes. Deconstructs the major themes used in the argument.	Very good use of the theoretical and conceptual models with good critical discussion and application. Good evidence of deconstruction.	Use of theory and concepts limited but relevant. Application could be improved and there is a tendency towards description. Must provide more evidence of deconstruction.	Very poor use of theory and very little application of concepts. Very little description with not much evidence of analysis.
Synthesis/ Creativity/ Application	Logical presentation of themes with appropriate examples being demonstrated. Very good demonstration of synthesis. Models have been clearly applied to the argument.	Very good account of main themes with sound application. Good attempt at applying models to the argument. .Fairly good attempt at synthesising the salient points.	Good account of main themes with some attempt at application. Limited evidence of synthesis.	Very poor account of main themes with little or no application. No links between models and argument.
Evaluation	Shows clear evidence of in-depth critical reflection and evaluation of the argument by providing a robust defence of the opinions presented in the assessment.	Shows evidence of critical reflection and evaluation and a fairly cohesive defence of the argument	Shows some evidence of critical reflection but could have been developed.	Shows little or no evidence of critical reflection and needs to be much more developed. There is no defence of the opinions presented.

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May 14, 2022

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MSc Finance and Investment Module Quantitative Finance and Financial Markets Assignment Title QFFM Written Coursework Assignment (100%) Assignment Type Individual Assignment Word Limit 3,...

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