Trading simulations
Requirements
Hypothetically
invest
£2,000,000 shares an
d/or other financial securities and/or other
alternative
investments and yo
u should choose only assets you have investigated in CW1
and
whose prices are quoted in the Financial Times, or are obtained from other reliable
sources, which you must identify
.
Cash balances can be invested to earn LIBOR

1%.
Any borrowing will be at LIBOR +
1%.
Interest should be calculated daily and in
cluded in valuations.
Allow for dividends
and other distributions.
(i.e. Find the sterling 12 month LIBOR on
the appropriate
month and year from www.global

rates.com
)
Your
entire
well diversified
composite security
portfolio
OR
a part of it
should be fed
to
a portfolio simulation engine online with results observed
and recorded
daily
.
If the
entire portfolio could not be re

created in one single portfolio engine or platform, you
can either use more than one platform (i.e. Bloomberg, FX, Etc.) or simulate o
nly part of
it through an online portfolio engine
. Y
ou should properly justify you choice
and any
possible technical constrains
.
It is important that there are two versions of the portfolio
simulated in parallel; one optimized and
the other un

optimized
. S
et them to compete
over a period of three weeks with results ob
s
erved and recorded daily.



You should
manage
the two
simulated
portfolios
in
a dynamic fashion, with transactions
made at appropriate poi
nts in the price evolution paths
.
You
should investigate
the
effects of
portfolio
optimization through a comparative portfolio pricing
framework
.
You should
c
ompute
portfolio risk and
return as part of
advanced
framework
s, which
you must clearly explain. Reflect and draw clear conclusions of such frameworks’
u
sefulness
.
You should comment on the overall investment performance of your
simulated
portfolio
s
Your evaluation should include measures of performance and comparisons
with appropriate indices for the types of investment and sectors that you have
chosen.
Although the portfolio observation is time

boxed, this does not mean that it
has to be set up as a short term investment. It might be set up as a short term
,
a
medium or long term
investment
portfolio
, as neither minimizes
or negates
the
positive
effects
of the theory that underpin
proper asset and capital allocations
at an advanced
level
.
In your comments on
the simulated
portfolio performance, you should explain what you
have learned from the exercise, and what if anything you might change if i) you di
d the
same thing again as an academic exercise, and ii) you were investing your own money.
You should explain to what extent you might expect professional
security and portfolio
analysts
to follow a strategy similar to the strategy that you adopted.
You
should clearly
A. Euler
2
identify the use of advanced valuation methods, techniques and tools used and include a
statement on your attitude to risk.
Section 2.0
Trade Simulation Report.
Section 2.0
The report
In the report, you should address all of the CW requirements, and you are expected to have
your own view of what is expected and how much weight to give any p
articular requirement
element, however you will need to plan your answers carefully, in order to provide a
focused answer to the questions, within the word

limit.
The report should show that you have developed your understanding of the relevant
materials
in this module, therefore it is necessary that you, not only get correct numerical
answers, but also explain what is being calculated, how it is calculated, the underlying theory,
assumptions, the results at appropriate stages of the calculation, and in
terpretations of the
final answers.
You should justify relevant theories used, their relevance, where possible, demonstrate your
understanding of them, by using simple equations or diagrams, or some other illustrations
and in presenting your arguments, yo
u should also comment on possible strengths,
weaknesses and limitations.
Graphs, tables, panels, and other illustrations, should
NOT
be copied from books in a

wholesale

fashion, instead they but should be recreated with justified data selected on
approp
riate and relevant ranges.
You should justify any conclusion you reach on the basis of evidence, cross

referenced to,
or quotation from, the course lecture notes, seminar material, textbooks, other course
readings, or any other reliable source you choose
to use. A report without proper
referencing will not be acceptable.



You should make use of relevant articles, journals, white papers, books (which you
should clearly identify) in your research and relevant to the trading simulation to
support your work.
You should also explain the trading strategy followed. Your strategy
statement should include a statement on your attitude to risk, your own

views

,
identifying the theoretical basis for your decisions.
In your
trading simulations
,
you
should
make use o
f models and tools with advanced
features and should include measures of performance and comparisons with appropriate
indices. Justify the advanced features of the methodologies, models and techniques used
and their usefulness.
The length of the final pap
er should be
between
2500
and 3500
words, excluding exhibits,
should
be referenced, and contain a list of the sources of (i) your evidence and (ii) the
theory that underpins your analysis and commentary
.
Failure to do so is unprofessional
and fraudulent, a
nd will result in a failing grade for the report and possibly the
course
M043LON C04 CW2

Trading Simulation

Marks Available Marks Awarded
Learning Outcome Descriptor
Profit/Loss Making an overall profit or loss 15 or 0

Position The percentage that the overall profit made proportionally based on the combined P&L of the entire group. 0-15

Introduction An outstanding description of the performance of the portfolio,size of funds available, length of investment and compare your portfolio performance to a market benchmark for the same time period using S&P 500 as the market benchmark. 5
An excellent description of the above. 4
A good description of the above. 3
A reasonable description of the above. 2
A poor description of the above. 0-1

Investment Review An outstanding analysis. Macro-economic indicators have been identified precisely and well linked to the performance of the market and the portfolio. Outstanding interpretion of the components of portfolio and trading activities. 17-20
An excellent analysis. Major macroeconomic indicators have been identified and good links have been established to the performance of the market. A clear interpretaion of the components of portfolio and trading activities. 13-16
A good analysis. Some macroeconomic indicators have been identified and linked to the performance of the market to some extent. A relatively clear interpretation of the components of portfolio and trading activities. 9-12
A weak analysis with limited macro-economic indicators having been presented. A weak interpretaion of the components of portfolio and trading activities. 5-8
A poor analysis and use of incorrect data. A poor interpretaion of the components of portfolio and trading activities. 0-4

Discussion of relevant theories and application An outstanding discussion of the theories. Theories have been explained and critically appraised with reference made to appropriate academic research. Correct application of theory to trading activities and excellent linkages made between theories and applications. 17-20
An excellent discussion of the theories. Theories have been explained and critically appraised with reference made to appropriate academic research. A relatively strong evidence of broader research/reading. Good linkages made between theories and applications. 13-16
A good discussion of the theories. Theories have been explained and correctly applied in trading activities. Some evidence of broader research/reading. Some linkages made between theories and applications. 9-12
A weak discussion of the theories, explanations are weak with no evidence of wider reading, no justification being given in discussion. 5-8
Very poor discussion. Theories are not discussed. The discussions are not coherent. 0-4

Success or failure of the investment An outstanding evaluation. Well reasoned discussion/critical evaluation of the results. 9-10
An excellent evaluation. A relatively well reasoned discussion/critical evaluation of the results. 7-8
A good evaluation. Evaluation is adequate with some relevant points being made in the written analysis. 5-6
A weak evaluation.Written analysis attempted but lacks depth. 3-4
A weak evaluation. Written analysis, if attempted, is confused. 0-2

Future outlook An outstanding and precise discussion of the main issues. 5
An excellent and precise discussion of the main issues. 4
A good discussion of the main issues. 3
A weak discussion of the main issues. 2
Very poor discussion. Conclusion is not coherent. 0-1
Comments Section A Total

Marks Available Marks Awarded
Criteria Level Descriptor
Independent Research Strong evidence of being able to undertake broader research and collect relevant data 5
Adequate evidences of being able to undertake broader research and collect relevant data 4
Some evidence of being able to undertake broader research and collect relevant data 3
Weak evidence of being able to undertake broader research and collect relevant data 2
No evidence of being able to undertake broader research and collect relevant data 0-1

“Presentation and
Referencing
” Outstanding referencing and professional presentation. Work is correctly referenced and contains few spelling/grammatical errors. Language is appropriate and accessible. 5
Excellent presentation and referencing throughout. Occasional errors in grammar, sentence structure or spelling. 4
Good presentation and referencing throughout. Occasional errors in grammar, sentence structure or spelling. 3
Reasonable presentation and referencing throughout. Some errors in grammar, sentence structure or spelling. 2
Poor presentation and referencing throughout. Weak referencing throughout. Language is inappropriately used and multiple spelling and grammatical errors. 0-1
Section B Total
Assessment Total (A+B) 0

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Your email address will not be published. Required fields are marked *

Trading simulations
Requirements
Hypothetically
invest
£2,000,000 shares an
d/or other financial securities and/or other
alternative
investments and yo
u should choose only assets you have investigated in CW1
and
whose prices are quoted in the Financial Times, or are obtained from other reliable
sources, which you must identify
.
Cash balances can be invested to earn LIBOR

1%.
Any borrowing will be at LIBOR +
1%.
Interest should be calculated daily and in
cluded in valuations.
Allow for dividends
and other distributions.
(i.e. Find the sterling 12 month LIBOR on
the appropriate
month and year from www.global

rates.com
)
Your
entire
well diversified
composite security
portfolio
OR
a part of it
should be fed
to
a portfolio simulation engine online with results observed
and recorded
daily
.
If the
entire portfolio could not be re

created in one single portfolio engine or platform, you
can either use more than one platform (i.e. Bloomberg, FX, Etc.) or simulate o
nly part of
it through an online portfolio engine
. Y
ou should properly justify you choice
and any
possible technical constrains
.
It is important that there are two versions of the portfolio
simulated in parallel; one optimized and
the other un

optimized
. S
et them to compete
over a period of three weeks with results ob
s
erved and recorded daily.



You should
manage
the two
simulated
portfolios
in
a dynamic fashion, with transactions
made at appropriate poi
nts in the price evolution paths
.
You
should investigate
the
effects of
portfolio
optimization through a comparative portfolio pricing
framework
.
You should
c
ompute
portfolio risk and
return as part of
advanced
framework
s, which
you must clearly explain. Reflect and draw clear conclusions of such frameworks’
u
sefulness
.
You should comment on the overall investment performance of your
simulated
portfolio
s
Your evaluation should include measures of performance and comparisons
with appropriate indices for the types of investment and sectors that you have
chosen.
Although the portfolio observation is time

boxed, this does not mean that it
has to be set up as a short term investment. It might be set up as a short term
,
a
medium or long term
investment
portfolio
, as neither minimizes
or negates
the
positive
effects
of the theory that underpin
proper asset and capital allocations
at an advanced
level
.
In your comments on
the simulated
portfolio performance, you should explain what you
have learned from the exercise, and what if anything you might change if i) you di
d the
same thing again as an academic exercise, and ii) you were investing your own money.
You should explain to what extent you might expect professional
security and portfolio
analysts
to follow a strategy similar to the strategy that you adopted.
You
should clearly
A. Euler
2
identify the use of advanced valuation methods, techniques and tools used and include a
statement on your attitude to risk.
Section 2.0
Trade Simulation Report.
Section 2.0
The report
In the report, you should address all of the CW requirements, and you are expected to have
your own view of what is expected and how much weight to give any p
articular requirement
element, however you will need to plan your answers carefully, in order to provide a
focused answer to the questions, within the word

limit.
The report should show that you have developed your understanding of the relevant
materials
in this module, therefore it is necessary that you, not only get correct numerical
answers, but also explain what is being calculated, how it is calculated, the underlying theory,
assumptions, the results at appropriate stages of the calculation, and in
terpretations of the
final answers.
You should justify relevant theories used, their relevance, where possible, demonstrate your
understanding of them, by using simple equations or diagrams, or some other illustrations
and in presenting your arguments, yo
u should also comment on possible strengths,
weaknesses and limitations.
Graphs, tables, panels, and other illustrations, should
NOT
be copied from books in a

wholesale

fashion, instead they but should be recreated with justified data selected on
approp
riate and relevant ranges.
You should justify any conclusion you reach on the basis of evidence, cross

referenced to,
or quotation from, the course lecture notes, seminar material, textbooks, other course
readings, or any other reliable source you choose
to use. A report without proper
referencing will not be acceptable.



You should make use of relevant articles, journals, white papers, books (which you
should clearly identify) in your research and relevant to the trading simulation to
support your work.
You should also explain the trading strategy followed. Your strategy
statement should include a statement on your attitude to risk, your own

views

,
identifying the theoretical basis for your decisions.
In your
trading simulations
,
you
should
make use o
f models and tools with advanced
features and should include measures of performance and comparisons with appropriate
indices. Justify the advanced features of the methodologies, models and techniques used
and their usefulness.
The length of the final pap
er should be
between
2500
and 3500
words, excluding exhibits,
should
be referenced, and contain a list of the sources of (i) your evidence and (ii) the
theory that underpins your analysis and commentary
.
Failure to do so is unprofessional
and fraudulent, a
nd will result in a failing grade for the report and possibly the
course
M043LON C04 CW2

Trading Simulation

Marks Available Marks Awarded
Learning Outcome Descriptor
Profit/Loss Making an overall profit or loss 15 or 0

Position The percentage that the overall profit made proportionally based on the combined P&L of the entire group. 0-15

Introduction An outstanding description of the performance of the portfolio,size of funds available, length of investment and compare your portfolio performance to a market benchmark for the same time period using S&P 500 as the market benchmark. 5
An excellent description of the above. 4
A good description of the above. 3
A reasonable description of the above. 2
A poor description of the above. 0-1

Investment Review An outstanding analysis. Macro-economic indicators have been identified precisely and well linked to the performance of the market and the portfolio. Outstanding interpretion of the components of portfolio and trading activities. 17-20
An excellent analysis. Major macroeconomic indicators have been identified and good links have been established to the performance of the market. A clear interpretaion of the components of portfolio and trading activities. 13-16
A good analysis. Some macroeconomic indicators have been identified and linked to the performance of the market to some extent. A relatively clear interpretation of the components of portfolio and trading activities. 9-12
A weak analysis with limited macro-economic indicators having been presented. A weak interpretaion of the components of portfolio and trading activities. 5-8
A poor analysis and use of incorrect data. A poor interpretaion of the components of portfolio and trading activities. 0-4

Discussion of relevant theories and application An outstanding discussion of the theories. Theories have been explained and critically appraised with reference made to appropriate academic research. Correct application of theory to trading activities and excellent linkages made between theories and applications. 17-20
An excellent discussion of the theories. Theories have been explained and critically appraised with reference made to appropriate academic research. A relatively strong evidence of broader research/reading. Good linkages made between theories and applications. 13-16
A good discussion of the theories. Theories have been explained and correctly applied in trading activities. Some evidence of broader research/reading. Some linkages made between theories and applications. 9-12
A weak discussion of the theories, explanations are weak with no evidence of wider reading, no justification being given in discussion. 5-8
Very poor discussion. Theories are not discussed. The discussions are not coherent. 0-4

Success or failure of the investment An outstanding evaluation. Well reasoned discussion/critical evaluation of the results. 9-10
An excellent evaluation. A relatively well reasoned discussion/critical evaluation of the results. 7-8
A good evaluation. Evaluation is adequate with some relevant points being made in the written analysis. 5-6
A weak evaluation.Written analysis attempted but lacks depth. 3-4
A weak evaluation. Written analysis, if attempted, is confused. 0-2

Future outlook An outstanding and precise discussion of the main issues. 5
An excellent and precise discussion of the main issues. 4
A good discussion of the main issues. 3
A weak discussion of the main issues. 2
Very poor discussion. Conclusion is not coherent. 0-1
Comments Section A Total

Marks Available Marks Awarded
Criteria Level Descriptor
Independent Research Strong evidence of being able to undertake broader research and collect relevant data 5
Adequate evidences of being able to undertake broader research and collect relevant data 4
Some evidence of being able to undertake broader research and collect relevant data 3
Weak evidence of being able to undertake broader research and collect relevant data 2
No evidence of being able to undertake broader research and collect relevant data 0-1

“Presentation and
Referencing
” Outstanding referencing and professional presentation. Work is correctly referenced and contains few spelling/grammatical errors. Language is appropriate and accessible. 5
Excellent presentation and referencing throughout. Occasional errors in grammar, sentence structure or spelling. 4
Good presentation and referencing throughout. Occasional errors in grammar, sentence structure or spelling. 3
Reasonable presentation and referencing throughout. Some errors in grammar, sentence structure or spelling. 2
Poor presentation and referencing throughout. Weak referencing throughout. Language is inappropriately used and multiple spelling and grammatical errors. 0-1
Section B Total
Assessment Total (A+B) 0

Leave a Reply

Your email address will not be published. Required fields are marked *