Posted: August 18th, 2015
Advanced Valuation of Securities Trading
Prepare as part of an advanced investment plan, a well-defined and diversified(i.e. by geography, sector, type) combination of no less than seven assets (equity, bonds, and any other alternative investments) with proper allocation justification. Use a comprehensive range of performance measures as indicators of quality to such investments.
Compute correlation and variance-covariance matrices as well as complete micro and macro security forecasts. State your philosophy in terms of your attitude to risk and your preference for an active or passive form of management of the portfolio you created. Justify your choice.
Use excel and an advanced optimizer or other equivalent optimizing methods, such as HL, and/or Lagrange, and/or Utility maximization, etc., techniques or tools to solve for the capital allocation, further on identify the minimum and maximum variances and discuss the results, and where appropriate the usefulness of the methodologies, techniques and models used.
The analysis, interpretations, and the theoretical treatment should be done in the context of both passive and active portfolio framework, that should include your beliefs, views, and should be stylized properly. It is important that both Markowitz and William Sharp models are used in your analysis, valuation, and interpretation.
Assume the role of a security analyst and portfolio manager, and as such you must consider the portfolios sensitivity to market risk, as measured by its beta in the case of equity, and the portfolios sensitivity to interest rate risk, as measured by its duration in the case of bonds.
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, you should also comment on possible strengths, weaknesses and limitations.
In the report, it should structure as follows:
-Advanced Investment Plan
-Information Acquisition and Forecasting
-Advanced Portfolio Analysis and Valuation
-Advanced Optimization Methodologies, Tools and Techniques
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