• Assume you have AUD1, 000, 000. Create an equally weighted

portfolio of your two stocks as at 31 October 2022. Show all

calculations and workings.

On 30 January 2023, you receive news that highlights

instability in the global banking sector and believe there is

significant downside risk which may impact your Australian

banking stock(s). However, in this environment you believe

there will be a flight to safe assets such as gold, and are

therefore bullish on your gold stock(s). Devise a strategy

that has the following objectives listed below and provide a

detailed description of all your transactions and consider

all costs.

i. Protect the portfolio from adverse movements in the

banking stock(s), by using an

appropriate options strategy (where the option is held to

maturity) from 30/01/2023 (start date) to 18/05/2023 (close

out date); and

ii. Protect the portfolio from a market downturn whilst

maintaining the full exposure to the unsystematic risk in

your gold stock(s) from 30/01/2023 (start date) to 18/05/2023

(close out date) (hint: consider the use of a futures

contract).

At the end of the period, close all the positions and

evaluate the effectiveness of your strategy. Consider your

total portfolio returns from inception (31 October 2022)

without the hedging strategies versus the total portfolio

returns with the hedging strategies and assess these returns

against a relevant benchmark. Was it superior or ineffective?

What are the potential sources of ineffectiveness in your

strategy that may contribute to it performing better/worse

than expected?

Need to use EXCEL in this assignment, Data file is

attached

Assignment details | Need to use Excel, data file is attached