MSc Finance and Investment-QFFM Written Coursework Assignment,

MSc Finance and Investment

Module

Quantitative Finance and Financial
Markets

Assignment
Title

QFFM Written
Coursework Assignment (100%)

Assignment Type

Individual Assignment

Word Limit

3,500 (+500 words max allowed)

Weighting

100%

Student Cohort

Issue Date

11th Dec 2012

Submission Date

30h Jan 2013

Feedback Date

TBC

Internal Verifier

Plagiarism

When
submitting work for assessment, students should be aware of the LSBF guidance
and regulations in concerning plagiarism. All submissions should be your own,
original work.

You must submit an
electronic copy of your work. Your submission will be electronically checked.

Harvard
Referencing

The
Harvard Referencing System must be used. The Wikipedia website must not be referenced in your work.

Learning Outcomes

On
successful completion of this assignment you will be able to:

Design and
apply quantitative tools in financial marketsCritically
evaluate the changes that might occur if certain assumptions in the
models used are changedCompute basic
valuation analysis for financial markets instrumentsEvaluation of
the inputs variables and their outputs in the use of quantitative tools
in financial marketsSynthesis and
evaluate findings and present same in a professional manner to a varied
audience

Grading
Criteria

Grading
criteria is available at the end of this document.

Your
Task

Answer should be provided as a report writing
PART A
What
factors are responsible for the recent surge in international portfolio
investment (IPI)? (10 marks)Security
returns are found to be less correlated across countries than within a
country. Why can this be? (10 Marks)Explain
the concept of the world beta of a security. (5 Marks)Explain
the concept of the Sharpe performance measure. (5 Marks)
(Total 30 Marks)
PART B
A commodity trader believes that
average volume of wheat he traded can be described by a Normal model
with a mean of 32,000 metric tons and standard deviation of 2,500 metric
tons.(Total marks
25 marks)
a) If a client buys some bushels of
his wheat, would it be reasonable for the client to hope that the
transactions will reach 40,000 metric tons? Explain. (5 marks)
b) Approximately what fraction of
the transactions can be expected to reach less than 30,000 metric tons? (5
marks)
c) Approximately what fraction of
these trades can be expected to reach between 30,000 and 35,000 metric tons?
(5 marks)
d) Estimate the IQR of the trade
volumes. (5 marks)
e) In planning an investment
strategy, the commodity trader wants to offer an opt-out guaranty (or an
option to cancel a trade) to any customer whose transaction volumes failed to
deliver an agreed volume of transaction compared to the mean. However, he
does not want to take too big a risk. If he is willing to give transaction
refunds to no more than 1 of every 25 customers, for what volume level of
transactions can he offer an opt-out guaranty? (5 marks)
In 1999, Lehman Brothers estimated that
48% of its investment bank traders took diverse forms of soft drugs.
Based on these data, Lehman established a Drug Eradication Plan goal of
reducing that figure to 16% by the year 2010. To that end, they hoped to
achieve a reduction to 20% by 2006. In 2006, they released a research
study in which 23% of a random sample of 1,815 traders said they were
currently addicted. Is this evidence that progress towards the goal is
off track? (Total marks = 20
marks)
a) Write appropriate hypotheses. (5
marks)
b) Verify that the appropriate
assumptions are satisfied. (5 marks)
c) Find the p-value of this test.
(5 marks)
d) Explain what the p-value means
in this context and set an appropriate conclusion – Of course, your
conclusion may be incorrect and if so which kind of error did you commit? (5
marks)
7. Of all the CEOs in the Citibank,
Walter Wriston had the highest disapproval
rating from the internal bankers near the end of his mandate. His disapproval
rating was the highest at 66% in May 1973 during the oil crisis, before he
resigned. In May 2007, Charles Prince’s disapproval rating was 63%, according
to an internal poll of 1,000 internal bankers. Bank experts started
discussing whether Charles Prince’s rating was still discernibly better than
that of Walter Wriston’s. What do you think? (Total marks = 15 marks)
8.
A start-up company has developed an improved electronic
chip for use in algorithm trading equipment. The company needs to project the
manufacturing cost, so it develops a spreadsheet model that takes into
account the purchase of production equipment, overhead, raw materials,
depreciation, maintenance, and other business costs. The spreadsheet
estimates the cost of producing 10,000 to 200,000 chips per year, as seen in
the table next.(Total marks = 10 marks)
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a)
Develop a regression model to predict Costs based on the Level of
Production and compare it to the dispersion obtained from the table
above. (5 marks)
b)
Re-expressing each variable based on logarithm,
establish the new regression model to predict Costs based on the Level of
Production, graph and analyse your new findings. (5 marks)

Guidelines

Please
read all questions and information provided carefully. Answer should be made
in appropriate length keeping in view the requirement of each question and
total word counts allowed.

In
addition, your assignment should demonstrate the following qualities:

A critical
appreciation of relevant literature and its use to support argument,
substantiate calculations and other aspects of the assignment.
Taking ownership
of the content, being prepared to debate and argue a personal position, and
providing evidence of evaluative skills. A submission made up of extracts
from published sources which is descriptive or simply just theoretical
regurgitation is not acceptable. Your submission must have interpretation and
consideration of the challenges and issues of taking theory into practice.
Logical
flow of ideas and treatment; appropriate selection of real world factors
related to the companies under scrutiny.

Evidence
of additional personal research, and the ability to analyse material from a
variety of appropriate relevant perspectives.

Presentation,
structure, appropriateness of methodology, breaking into section
headings/subheadings, tidiness.

Marks
will be awarded for proper referencing and originality of work. Also note
that plagiarism is a serious offence and your submission will be
electronically checked.

Your
report must be handed in electronically no later than given date of
submission.

Grading
Criteria

Criteria

70%-100%

60-69%

50-59%

0 to 49% Fail

Generic
skills:communication and presentation.

Comprehensive and correctly
structured assessment. Style of writing is very fluent and develops a
coherent and logical argument. Excellent referencing.

Well structured report which
follows appropriate format but some aspects of layout and referencing could
be improved. Style of writing is
fairly fluent. Good referencing.

Good report in most aspects but
suffers from variations in quality and the layout contains some
inadequacies. Style of writing is
satisfactory. Referencing needs improving.

Very poor report which is
incorrectly structured and contains major errors and omissions. Style of
writing lacks coherence and fluency. Poor referencing.

Knowledge
& Understanding

Demonstrates excellent knowledge of
theory and provides critical theoretical underpinning. Very good
interpretations and summarising of main themes.

Wide range of knowledge
demonstrated and evidence of good understanding of the topic.

Ability to interpret and summarise
succinctly.

Good range of knowledge
demonstrated but weaknesses in key areas.
Some understanding displayed of the topic.

Summary and interpretation are
satisfactory.

Very poor range of knowledge
demonstrated and there are major weaknesses evident in interpretation and
understanding.

No clear interpretation of main
themes.

Analysis

Excellent use of theoretical and
conceptual models to guide analysis linked with a critical discussion of main
themes.
Deconstructs the major themes used
in the argument.

Very good use of the theoretical
and conceptual models with good critical discussion and application.

Good evidence of deconstruction.

Use of theory and concepts limited
but relevant. Application could be
improved and there is a tendency towards description.

Must provide more evidence of
deconstruction.

Very poor use of theory and very
little application of concepts.

Very little description with not
much evidence of analysis.

Synthesis/
Creativity/ Application

Logical presentation of themes with
appropriate examples being demonstrated. Very good demonstration of synthesis.
Models have been clearly applied to the argument.

Very good account of main themes
with sound application. Good attempt
at applying models to the argument. .Fairly good attempt at synthesising the
salient points.

Good account of main themes with
some attempt at application. Limited
evidence of synthesis.

Very poor account of main themes
with little or no application. No links between models and argument.

Evaluation

Shows clear evidence of in-depth
critical reflection and evaluation of the argument by providing a robust defence of the opinions presented in the
assessment.

Shows evidence of critical
reflection and evaluation and a fairly
cohesive defence of the argument

Shows some evidence of critical
reflection but could have been developed.

Shows little or no evidence of
critical reflection and needs to be much more developed. There is no defence
of the opinions presented.