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英国金融assignment代写

Asset & Liability Management Project

英国金融assignment代写 In this two-part project, you will apply your understanding of efficient frontier and how it can be used in optimized asset allocation.

Overview

In this two-part project, you will apply your understanding of efficient frontier and how it can be used in optimized asset allocation. Through this project, you will demonstrate your ability to 1) calculate portfolios’ risks and returns, 2) analyze the results, and 3) make recommendations.

Details  英国金融assignment代写

Please review the directions for each part of the project and answer each question fully. For the project, you will submit a two–five page write-up, as well as an Excel spreadsheet documenting your calculations.

Submit the Word document and Excel spreadsheet by clicking Submit Assignment.

Part I

You are the investment manager of a bank. Your team is responsible for performing efficient frontier analysis, assets allocation, and optimization for the bank. Analyst A considered the following asset classes.

Asset Class
A. domestic equity
B. domestic intermediate bonds   英国金融assignment代写
C. domestic long-term bonds
D. international bonds
E. real estate

Analyst A constructed the following table of corner portfolios, based on the mean-variance analysis, using these five asset classes and some estimates of return, standard deviation, and correlation. Portfolio number 8 is the global minimum variance portfolio.  英国金融assignment代写

Portfolio Number Expected Annual Return Annual Standard Deviation Weights of A (%) Weights of B Weights of C Weights of D Weights of E
1 11.00% 16.00% 100 0 0 0 0
2 9.40% 10.50% 48.3 0 0 0 51.7
3 8.80% 9.30% 37.5 0 0 14.5 48
4 8.30% 8.50% 30.7 0 8.7 15.7 44.9
5 7.80% 7.70% 27.7 19.2 0 10.6 42.5
6 6.80% 6.50% 19.7 38.6 0 4.1 37.6
7 6.20% 5.90% 14.8 50.7 0 0 32.5
8 5.20% 5.60% 5.3 66.4 0 0 28.3

In your write-up and Excel spreadsheet, address the following:

  1. Comment on the data quality of the estimates.
  2. Comment on the appropriateness of the mean-variance optimization approach in setting asset allocation.  英国金融assignment代写
  3. Assuming Analyst A’s estimates are all correct:
    1. Draw the efficient frontier with appropriate labels.
    2. Calculate the asset-class weights in an efficient portfolio with an expected return of 9.00%.
  4. List, describe, and compare three other approaches for optimal asset allocations.
英国金融assignment代写
英国金融assignment代写

Part II

You decide to join an endowment fund as you believe it is a better opportunity for your career growth. This fund has an investment objective of maintaining the real purchasing power after distributions with the annual spending rate of 3%. The following assumptions are used in the mean-variance analysis:

  • The expected annual inflation is 3%.
  • The annual cost of earning investment returns is 0.4%.
  • The risk-free rate is 2%, which is the T-bill yield.  英国金融assignment代写
  • The annual portfolio standard deviation is preferred to be below 9%.
  • The fund wants to preserve capital and to minimize the probability that the portfolio return will be less than 4.5% based on Roy safety-first criterion.
Asset Class Expected Return (%) Standard Deviation
A. Bonds 4.0  英国金融assignment代写 6.0
B. Mortgages 6.0 9.0
C. Domestic Equity 10.0 15.0
D. Emerging Market Equity 12.0 24.0
Correlation A B C D
A  英国金融assignment代写 1.0 0.7 0.2 NA
B 0.7 1.0 0.3 NA
C 0.2 0.3 1.0 0.7
D NA NA 0.7 1.0
Portfolio Number Expected Annual Return Annual Standard Deviation Weights of A (%) Weights of B Weights of C Weights of D
1 5.0% 5.9% 82 5 7 6
2 9.5% 0 58 27 15
3 10.5% 0 0 75 25

In your write-up and Excel spreadsheet, address the following:

  1. Determine the weights of the efficient portfolio with the expected return equal to the fund objective, assuming that only the four asset classes are permissible.
  2. Determine the overall most appropriate strategic asset allocation for the fund, assuming that T-bills are also a permissible asset class.

Assessment   英国金融assignment代写

Your submission will be assessed on the quality of your analysis and the accuracy of your calculations. To receive full marks for each criteria, you will need to do the following:

  • Quality of analysis:Apply critical thinking and a sophisticated understanding of course concepts
  • Accuracy of calculations:Complete calculations without errors
英国金融assignment代写
英国金融assignment代写

 

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