BAFI3192 Risk Management

Group Assignment
Assessment: 20% towards your total mark
Complete in teams: up to six people in each team, individual reports are
accepted.
Deadline: Report due on Monday Week 10. The time is timed on Turnitin.

Goal
The goal of this team assignment is to help you get a better understanding of the
investment process and, importantly, a better understanding of your attitudes
towards return and risk in the context of financial market investing.

Requirements

Create an investment portfolio to complete a number of trades (buys and

sells). The portfolio is to be created using the online trading platform.
Submit a team report to include:
o A strategy and trading philosophy of your portfolio (this can be
based on fundamental, technical or a combination);
o The market you have selected;
o The Risk control plan;
o Explanation of trades undertaken (notebook and diary);
o Maintenance of a traders notebook or diary.

Each team is to prepare a report reflecting upon their trading activities and
performance over the period. Your discussion and analysis in the report should
consider the total return on the portfolio, risk characteristics and key marketwide or industry or firm-specific events that influenced trading decisions and
subsequent results. A brief chronicle of major events with their associated impact
on trading decisions, presented as an appendix, should be quite useful (Hint:
begin the journal early in your trading activity in order to make this easy to pull
together for the final report). Calculations of performance measures can usually
be summarized in several tables and graphs, which should also be appended.
The report should also include information on, but not necessarily limited to:

The initial sector weightings of the portfolio and the rationale for that
composition, and the final sector weightings;
A summary of trading activity during the game, including brief reasons for
trades;

A comparison of the return expected on the portfolio (using the weighted

Beta of the portfolio) and the actual return achieved;
An overall evaluation of the performance of the portfolio, including Sharpe
Ratio etc.;
Reflections on your experience of participating in the trading game

An important goal of this assignment is to give you a (costless) insight in to your

trading behaviour. Accordingly, the reflection component of the report is quite
important: we want to know what you learnt from this exercise.

Portfolio Investment Strategy

Since the trading game is only for a few weeks, the investment strategy is to
generate reasonable short-term growth in the value of the portfolio over the
trading period, but with moderate risk.

Portfolio Trading Activity

A simple buy-and-hold is not permissible: As the objective of the assignment is to
enable you to get a better understanding of your attitudes to return and risk and
your trading behaviour, you need to buy and sell shares during the course of the
game. Accordingly, a minimum of 10 trades is required.
While you are required to provide a rationale for the composition of your
portfolio, you are not required to undertake a detailed valuation of the individual
shares selected.

Trading Systems
Market Watch
1. Go to http://www.marketwatch.com/game/bafi3192-risk-management2016b
2. Enter the game. Instructions can be found in Market Watch instruction
documents.
Further information can be found on the FAQ on Blackboard.

Report format

The report should not exceed 8 pages. These main 8 pages do not include
appendices. You can include as many appendices as you want.
Use font Calibri, font size no smaller than 12. Make the report presentable.
The report is to be submitted on Turnitin. A Turnitin account will be setup.
You need to submit a hardcopy of the report to the tutor.

Submission
Soft copies must be submitted to Turnitin.

A penalty of 5% final course grade for each day of late submission. Example: one
day late - maximum possible grade of the assignment drops to 15%.

Marking criteria
Grades will be awarded on:

The level of research put in the trades. Examples of research: use

fundamental analysis to select stocks, use technical analysis to select
stocks, research how macroeconomic condition affects the stock markets.
How knowledge from the Risk Management course is applied to analyzing
the risks associated with the trades, and to forming risk management
strategy.
How well the portfolio is managed. Students may want to refer to basic
portfolio management techniques for managing the portfolio.
How well the report is organized and written. English grammar and
spelling mistakes are penalized.
None of your mark is related to how much money your portfolio made or
lost. You will not be penalized if you made a loss, not penalized if your
return was less than market, not penalized if you made less than other
groups. Try to draw lesson from your trades if you made less than you
expected.