Choose one of the strategies in the wiki below. All strategies are ending in 3 months since initiation. Write down the names of students in the specified field. The Hometask 2 may be done in groups of no more than 3 students.
2. For the chosen strategy identify the maximum and the minimum profit and loss scenarios. What is the most likely purpose of using the strategy you are analyzing?
3. With the strategy chosen define in an Excel spreadsheet:
A. It's value using monte-carlo simulation. For volatility calculate the annual historical volatility of returns on the daily historical range 01.01.2014-31.12.2018 (including). Risk-free rate shall be a comparable yield on government securities for the underlying currency. Dividend or convenience yields equal to zero. Use at least 1000 iterations
B. In the assumption that the strategy was set up in the beggining of each calendar month in the year 2018 perform a back test (12 times). Define the minimum and the maximum profit and loss on the strategy, number of positive and negative returns, average return on the outcomes studied. Was the strategy on average profitable if its price was always equal to the price calculated in A? (Note: for back test purposes use relative strikes, i.e. measured as a percentage of spot price at initiation of the strategy. So that each measurement is performed on the basis of different absolute values of spot and strike prices)
4. In Bloomberg terminal:
A. Construct the strategy using the OMVE/OVML calculator. Identify the strategy price. Is the result the same with 3.A.? Why? Identify differences in assumptions which have led to the difference in strategy value.
B. Perform a back test for the strategy for the same period as in 3.B. Do the results look the same? Why? Identify the differences in assumptions for back test which have led to differences in backtest results.
5. Prepare a MS Word-based report with answers on the questions above. Support your findings with MS Excel spreadsheet and Bloomberg screens.