AFE6013-B Risk Management and Derivates.

Group Coursework (25 pages maximum, including all tables and appendices. An annotated excel file including all the numerical formulae has to be submitted at the same time.)

Submission deadline:

- Failure to submit your work by this deadline will result in a mark of 0%
- The assignment must be submitted to the Canvas site for this module
- You are advised to plan your work carefully and back-up your work. Computing problems will NOT be accepted as reasons for non-submission.

The assignment is an assessed piece of work that accounts for 30% of the total marks available for this module. Each member of group is expected to contribute equally to the whole project. The mark awarded to the submitted work is allocated equally to each member of a group, unless sound and fair cause justifies doing otherwise. The assignment is to be completed in groups. Each group should contain no more than 6 student members. Groups having less than 6 members should be able to function effectively and complete the work assigned, but clearly the distribution of work will be somewhat greater than with 6 students. Students enrolled on this module are required to form themselves into groups by self-selection. This should be completed before October 16th 2019.

The group membership has to be agreed by the students concerned and the names submitted through the CANVAS facility.

It is helpful to assign a group spokesperson that so any communications with me are directed through a single channel.

All students need to become fully acquainted with the University’s policy on plagiarism.

You need to submit the Excel file of calculations used in evaluating the various options, which has to be fully documented so the reader can readily understand the structure of calculations.

**The assignment**

- Using the attached excel file as a guide estimate the binomial tree parameters for the monthly log-returns of each series.

**See the excel file**

[15%]

- Calculate the risk-neutral probabilities associated with the parameter estimates in part (a). You may assume a risk-free interest rate of 1.5% per annum. Comment.

**Need to do part (a) to get to part (b). **

**Formulae needed are in the lecture slide added and the exam formula sheet.**

**Will need to be done in excel, can then be added in word with comments as evaluation.**

[10%]

Submission of Project

Only submit 1 copy of the assignment per group.

The submission has to adopt the following formatting conventions:

- The work should be written in easy-to-read English using an academic style, and without journalistic hyperbole.
- Pagination: each page is to be numbered consecutively from 1, except the first.
- The first page is the title page and the second page is a contents page.
- The title page has to contain the title, group membership and the word count.
- The body of contents is to be sensationalized and numerically ordered.
- Minimum font size is Times Roman 12 pt or equivalent. 1.5 line spacing is preferred.
- Text is to be justified both left and right.
- Tables and figures have to have an informative caption and be numerically labeled. If convenient, they are to be placed in close proximity to the relevant text, or if large, put into a separate section after the conclusions.
- All external sources of information are to be cited using the normal citation style. Complete details of all citations are to be collected together in a section entitled “References”.
- Equations such as formulas should be entered using an equation editor, and numbered. Complex derivations should be assigned to an appendix.
- The complete work is to be organized in the following way: