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HOQUE’S IIM AND INDIVIDUAL & GROUP PRESENTATION

FOR HEDGING AND INVESTMENT DECISION

Individual Presentations & Reports

WHAT ASSET INTERESTS YOU AS AN INDIVIDUAL?

From Syllabus: INDIVIDUAL PRESENTATION & REPORTS: After the fundamental and technical parts, each student will select one asset from among currency, commodity, or financial sectors. This is the primary asset of choice. Each student will also select the hedging asset from futures and/or options. This portfolio will be evaluated according to performance, presentation, and basis of selection. In their analyses, students will be using on line trading analytics to construct their portfolios, and they will present a comprehensive recommendation. The order of presentation in the class will be determined by way of lottery, if needed. Both hard copy and electronic copy of reports will have to be turned in. Best of two reports will be used for grading.

TITLE PAGE (7 POINTS)

CONTENTS

Page number

I Portfolio Executive Summary 1 (18 pts)

II Fundamental Analysis 2 (20 pts)

III Technical Analysis 5 (18 pts)

IV Hedging Analysis 6 (25 pts)

V Investment Mindset 12 (10 pts)

VI Final Investment Recommendation & Realized,

if not available Marked to Market Results 13 (7 pts)

VII References 14 (2 pts)

 

 

Attachment: Primary Resources

EXECUTIVE SUMMARY (18 POINTS)

I. Primary asset:

Position

Profit exit point

Loss exit point

Realized HPR; If not realized, Marked to Market on two days before submission

Annualized return for Primary asset

II. Hedging asset:

Position

Realized HPR; If not realized, Marked to Market on two days before submission

Annualized return for Hedging asset

III. Risk adjusted annualized return : Annualized return for Primary asset + Annualized return for Hedging asset

HOQUE’S IIM

Step I. Fundamental Analysis – Should we take a position in the primary asset of choice?

Step II. Technical Analysis –Is this a good time to take a position in the primary asset of choice?

Step III:

  • A) Risk Management – Hedge or not Hedge?
  • B) Return Enhancement – Any Opportunity for Texas Hedge?

Step IV. Mindset – How to sift noise from information? Free your mind from baggage, bias and bubble.

FUNDAMENTAL ANALYSIS – WHAT POSITION TO TAKE? 20 POINTS

Traditional Country and Industry Analyses

Traditional Analysis of Strength and Weaknesses of the Company

Inter-market Analysis (comparative analysis of similar assets)

Benchmarking with experts

Making Conditional Recommendation (concur/differ with experts? Then give yours)

(Specify Risk Reward Exit Points) Keeping Independence and Objectivity from Experts

TIP

Use information from

all places

TECHNICAL ANALYSIS – IS THIS RIGHT TIME TO TAKE THE POSITION? (18 POINTS)

1) Hoque’s Wind Analysis:

Gauge the direction of the wind (Fast and Slow Stochastics)

Gauge the momentum of the wind (ADX)

Gauge the longevity of the wind (RSI)

2) Benchmarking with experts (investing.com) regarding the direction, momentum and longevity (experts will indicate support and resistance) concur/differ with experts

4) Making Conditional Recommendation (concur/differ with experts? Then give yours) keeping independence and objectivity - leaning with the wind

HEDGING ANALYSIS – TO HEDGE OR NOT TO HEDGE? 25 POINTS

1) Identification of the Market As Backwardation, Contango, Efficient or Mix Market

2) Basis Analysis:

Intra Inter-market and Inter-market Analyses

HOW DO WE USE MARKET IDENTIFICATION & BASIS?

To answer this question, we need two things:

  • identification of the market as normal backwardation/contango/efficient

i)Backwardation (F0<St or E(St)) and Short hedgers dominate

ii) Contango (F0>St or E(St)) and Long hedgers dominate

AND

2) slope of basis or movement of basis.

REFERENCES (2 POINTS)

AN EXAMPLE OF
EXECUTIVE SUMMARY

Yen

Portfolio

Long one (1) Japanese Yen Spot Contract at $0.8155 on April 29, 2013

Total Contract = 125,000 yen x .8155 = $101,937.50

Entry & Exit Points

Market Entry on April 29, 2013: 81.55

Profit Exit Point (REWARD): 103.10

Loss Exit Point (RISK): 60.00

Primary Asset Holding Period Return (HPR) = 26.28%

Primary Asset APR x (360 / 18) = 525.6%

Hedging Asset Holding Period Return (HPR) 106.14%

Hedging Asset APR x (360/18) = ??

Total Portfolio Holding Period Return = 33,287.5/125,885 = 26.44%

Total Portfolio APR x (360/18) = ??