Investment Project

Investment Project
1. Please randomly choose 30 stocks from the Australian stock market, and based on the past three years’ monthly data, draw an efficient frontier and a minimum

variance frontier. Assume the investor’s risk aversion coefficient is 4, please find the optimal complete portfolio. (Hints: what type of rate of return will you use

(single return, discrete return, continuous return)? Will you annualize the return? What type of average will you use (time-weighted average including arithmetic and

geometric average, or dollar weighted average)? Are the borrowing rate and lending rate the same? Why? Try to create an excel template and use “solver” function.) (10

marks)

2: Please create a template using the duration and the convexity to forecast the bond price changes due to the YTM changes. The template should be able to replicate

the one that we created in the class.(5 marks)

3: Please search “Orange County Bankruptcy” in Google. First, do some self-learning, and then write an essay to give me some directions on: Who is Robert Citron? What

was the Orange County Governance Structure? What was the political and economic background before the bankruptcy? What was the Orange County Investment Pool and

balance sheet (1994)? What was Citrons Strategy? How the Fed action affects the interest rate in 1994? Describe the crisis following by the Fed action. Describe the

outcomes. Finally what are the lessons to learn? (Again, please list all the references. The essay shouldn’t be longer than 2000 words, 20 marks)

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