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5.   Building a model: A model is built by using the data available till 28-10-22

6.   Testing the models: The models are tested against the data from 4- 11-22 to 8-12-22, in “3YB vs 5YB Performance”, “3YB vs 10YB Performance”, and “5YB vs 10YB

Performance”.

You should finish task 3 (“Working Copy 5YB” and “Working Copy 10YB”).

The yellow highlighted cells in “3YB vs 5YB Performance”, “3YB vs 10YB

Performance”, and “5YB vs 10YB Performance” will be automatically filled in. You will be able to see if there is improvement or decline in the portfolio performance (and the

best improvement) in green highlighted Column AM.

7. Using the results of tasks 3-6:

a. Identify the minimum variance portfolios for the “3YB vs 5YB”, “3YB vs 10YB” and “5YB vs 10YB” during the modelling period. Use only the weights already given, do not refine further. State the weight, the portfolio Standard Deviation (SD), mean and Return/SD.

b. Using Return/Risk as a criterion, identify the best performing portfolios during the period 4-11-22 to 8-12-22 in comparison to the modelling period, for “3YB vs 5YB”, “3YB vs 10YB” and “5YB vs 10YB”. State the weight, the portfolio Standard Deviation, mean and Return/SD.

c. Explain the reasons of why the best performing portfolio performed well during the test period.

Instructions for report

Include the answers to the questions (highlighted in BLUE) in the Report format below:

There is no mark for the Excel work, all marks are based on the report. But you should complete the excel working to be able to complete the report.

Report Structure

Cover Page: state your name, student ID, course name Content

Executive Summary (1 mark): Contains key points from your findings. This is not a summary, but only what a reader needs to take as  key takeaways.

Introduction (1 mark): This provides a roadmap to the reader, preparing them on what to expect in your report.

Methodology (3 marks): Explain the concepts used to build a 2-bond portfolio, as given under instructions above. (Do not just copy the steps, but explain the concepts behind it.)

Analysis (15 marks): A detailed analysis of your investigation. Answer the questions raised under instructions here, and make sure you include the following in your discussion:

a.   What did the yield curves tell you over the data series studied?

b.   What were the minimum variance portfolios during the modelling periods? How did it perform during the test period?

c.   What were the best performing portfolios during the test period, in comparison to the modelling period.

d.   Can you explain why the best performing portfolio performed well during the test period?

e.   Going beyond the test period, what strategy might you use to achieve the best Return/Standard Deviation ratio. State your assumptions.

Conclusion (1 mark): What have you found from your analysis. This is not a summary, but state only the main points.

Recommendation (3 mark): Based on your analysis, what recommendation would you provide to the senior executive of a Fixed Interest Securities Management company.

Reference (1 mark): State all your sources. Use Harvard-UTS Referencing Style (Updated) or similar.

Requirements of the Report

Page limit: No more than 10 A4 pages (Word or pdf format), excluding cover page, content, reference and appendices

Font size: 12, single spacing

One report submitted via Canvas, together with the Excel file. Name your file as namestudentID. e.g. inji24098765

Marking Guide

.    Excellent (>=85%) = A clear and excellent report of your report

.    Distinction (75% to 84%) = A clear and good report

.    Credit (65% to 74%) = A fair report and missing some key components

.    Pass (50% to 64%) = A poor report and missing many key components

.    Fail (< 45%) = Poor attempt at doing the assessment task