RIT cases (6 pages – excluding appendices ->please include a time stamped screenshot)
The RIT cases will run on the server continuously so you can run the simulation many times. To access these RIT cases, you will need the following information:
o Server name: 142.1.207.29
o Port #: 10014 for H1 / Port #: 10015 for H2 / Port #: 10016 for H3
• Case 1: Hedging with Futures Simulation (H1) (1 month calendar time = 5-minute simulation)
o Your goal is to construct a hedge using index futures to minimize portfolio variance.
o Document two simulations and comment on your trades and results. Please provide appropriate
screenshots in the appendices.
o Answer the 4 discussion questions listed at the end of the Case Brief.
• Case 2: Hedging – Portfolio Insurance Simulation 2 (H2) (Several minutes per simulation)
o Your goal is to use call and put options to hedge the exposure of a single equity security. You will build
three different positions (execute 1 position per simulation – i.e., run 3 simulations in total).
o Answer the 3 discussion questions listed at the end of the Case Brief.
o Answer the following questions: (1) Discuss the different hedging possibilities in this case and their
strengths and weaknesses relative to one another. (2) Discuss the implementation of the hedging
strategies, specifically, what was purchased/sold and why. Also, discuss the outcome (final portfolio value)
of the simulation and whether you believe you did a proper job hedging your exposure. (3) Discuss when
one might want to hedge all down-side risk versus tail-end risk; and how one would do the latter.
• Case 3: Delta Hedging Simulation (H3) (Several minutes per simulation)
o Your goal is to implement a dynamic delta hedge for an options position.
o Document two simulations (one with no fines and one with fines) and comment on your trades and
results. Please provide appropriate screenshots in the appendices.
o Address the 4 discussion questions listed at the end of the Case Brief.
o Answer the following questions: (1) The implication of delta hedging (in the case of selling options) results
in buying shares when the price goes up, and then selling shares when the price goes down. How can this
be a profitable strategy? (2) Why is a delta-hedging strategy better than the “stop loss” strategy where
one buys/sells X shares every time the underlying stock crosses the strike price?