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BAFI3271 Debt and Money Markets
Semester 1, 2024
Assessment Task 3 – Group Trading Simulation Project Report
Due date: Week 13 Monday 11:59pm June, 03 2024; Weight: 40%
Instructions
1. This is a group trading simulation project report
2. This assessment is designed to evaluate your achievement of Learning Objectives 1, 2, 3, 4 and 5 as detailed in Assessment Task 3 page on Canvas.
3. The maximum word limit for this assignment is 2000 words.
4. This assessment will measure your ability to:
§ Clearly identify and demonstrate the purpose of the project (10%)
§ Complete to deliver a thoroughly and concisely researched and analysed investment proposal that includes all the elements required of the proposal and aligned with the objectives of the portfolio. (50%)
§ Present a clear set of recommendations of the actions required by the portfolio manager. (25%)
§ Complete a business report to the standard required by the intended audience including compliance with report requirements. (7%)
§ Demonstrates an ability to participate actively and cooperatively in a team to advance a common goal (8%)
5. The assignment will be marked out of a total of 100 marks and will count towards 40% of the total marks for this Course.
6. The assignment must be submitted via Canvas by the due date and time. Please note penalties may apply to late submissions. Multiple submissions are permitted up to the due date and time.
7. For the purpose of this assignment you must do some research and write a report based on the tasks outlined in this assessment detail. Please contact the Course Coordinator with any queries regarding your assignment at: [email protected]
You will have to do research and analyse relevant information from internet sources and databases for key resources including industry reports, Refinitiv Eikon and the RMIT Library.
You are expected to source your information and relevant statistics from reputable sources. DO NOT use generic sources such as Wikipedia. Any information included from other sources must be appropriately referenced using Harvard referencing style. For information regarding Harvard referencing style, please refer to http://www.lib.rmit.edu.au/easy-cite/ .
Assessment Taks
Part 1 – Immunisation: Cashflow matching portfolio management
Part 1.1: Provide an explanation of the following:
· The cashflow matching approach to portfolio management.
· The key issues with using a cashflow matching portfolio management approach.
· Identify and explain some alternative approaches to bond portfolio management.
Part 1.2: Construct a bond portfolio using a cashflow matching portfolio management approach. This activity was undertaken in the Week 11 workshop.
1. Explain your trading strategy to achieve the portfolio objectives
2. Explain the transactions you made, including:
- How did you decide the type and quantity of bonds that you bought?
- How did you decide or choose the quotation for your trading?
- What are the key learnings in executing your trading strategy?
3. Explain how you have met the requirement to build this portfolio at the lowest possible cost.
4. Analyse your portfolio management outcome
Your overall report should include at a minimum:
· All bond price screenshots from Refinitiv Eikon (In appendix) from the Week 11 workshop.
· The ‘ Liability and Asset Chart’ from the Bond Portfolio – Cashflow Matching Immunisation.xlsx Excel (In appendix and/or body of your assignment) from the Week 11 workshop.
· Appropriate screen shots of the detail of the Assets purchased in the portfolio (In appendix) from the Week 11 workshop.
Part 2 – A future yield curve scenario
Using your knowledge of the determinants of interest rates (Week 7 lecture material and tutorial) to forecast future yield curves for Australian Government Bonds (see forecast dates below). The basis for your forecasts will be a qualitative assessment of the projected macroeconomic context. Your report should include a description and justification for all assumptions used in the analysis
Guidance: Your analysis of the macroeconomic context at the dates for the yield curve forecasts will be shaped by:
· The expectation for the level of the cash rate;
· Inflation as measures by the Australian Consumer Price index (you may also consider the impact of inflation in other markets);
· Inflation expectations;
· Employment and Unemployment;
· Gross Domestic Product;
· Foreign exchange rates; and
· Any other relevant indicator.
Note: You are allowed to research and utilise external sources for forecasts of key economic indicators and interest rates.
Reflect on the portfolio management approaches you have learnt during the Semester. What are the key issues for these bond portfolio management approaches as a result of the yield curve scenarios you have developed
The dates for the yield curve forecasts are:
· June 30 2024 (or the relevant date that you complete this assignment);
· July 30 2024, and
· August 30 2024
Your analysis should include:
· A yield curve at 30 June 2023 for comparison purposes.
· A description of the shape of the yield curve at each date.
Appropriate use of diagrams and charts.