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Department of Economics (STG), ECO204
“FOUR MODELS OF A FINANCIAL PORTFOLIO WITH A RISK FREE ASSET AND A SYNTHETIC RISKY ASSET”
PROJECT 2 IS AN INDIVIDUAL PROJECT
Score: 5% of the overall course grade.
Released: Tuesday, February 14h (See ECO204-Week-18 / 204 Calendar)
Deadline:
10 pm, Wednesday, March 15th (See ECO204-Week-21 / 204 Calendar)
Note: Submissions 10 minutes after the deadline will be marked as “late” (see penalties below)
Two
“Deliverables”
(equally
weighted):
(1) One macro-enabled Excel file titled Lastname-Firstname.xlsm
Submit Excel file through Quercus-project-2-excel-assignment tab
(2) A (max) 5 to 6-page business-report (“paper”) – inclusive of a one-page executive summary – and a
“technical appendix” (‘virtually’ no page limit) in a pdf file titled Lastname-Firstname.pdf
Submit “paper” through Quercus-project-2-paper-assignment tab
and
Submit “paper” through Crowdmark-project-2-paper link (to be emailed to students)
Penalties:
100% project grade penalty for “late/incomplete/messed-up/incorrect/e-mailed” submissions:
Example 1: Despite submitting the paper on time through Quercus and Crowdmark, you
forgot to submit the Excel file through Quercus
Example 2: You submitted the Excel file and paper through Quercus but forgot to submit the
paper through Crowdmark.
Example 3: You e-mailed the project to the course e-mail account because of “technical
glitches” submitting the project “close to the deadline”.
Academic Code
of Conduct:
It is your responsibility to read and abide by the Student Academic Code of Conduct. Please note that
any attempt to “collaborate” with, or “receive/provide help” from/to other individuals/organizations, is
a serious violation of the academic code of conduct.
“Situation”
You are the CIO at a “family-fund”. This morning (“today” = Jan 31st 2023), the (risk-averse) Board of Directors (all
graduates of Ivey & Queens) put you in-charge of Project 2(04):
2
University of Toronto, Department of Economics, ECO 204, 2022-2023, Solo Project 2
Project 2(04) harkens back to the time you took ECO204 and aced the “Shred Ivey-Queens Project” by constructing a
financial portfolio in February 2023 by four different methods (more on this below). You’re going to prove your mettle – and
once again shred those Queens & Ivey snobs – by constructing four different models of the Project 2(04) financial portfolio.
“Project 2(04) Guide and Excel-Template” [EXCELLENT RESOURCES FOR PROJECT 2, TEST 3, FINANCE]
Please download the following files:
A Step-by-Step Guide to Project 2(04) [Video Presentation]
Project-2(04)-Excel-Template [enable “Macros”]
o I have designed the Template so the user doesn’t have to use the McSim Excel-add-in.
“Portfolio Assets” [See the Guide and Template for details]
Each student (“CIO”) must have the following “assets” in a one-month-holding-period portfolio for February 2023:
A Risk Free Asset
A Synthetic Risky Asset (SRA) formed by combining the following risky assets:
o WTI Oil
o Three equities from CRSP: of these, two will be in the “final portfolio” and one will be “dropped” and
‘replaced’ by “Oil”
o One corporate bond from the Blackrock-IBHC-ETF. The Project-2(04)-Excel-Template assumes zero risk of
default – feel free to “tweak” as you wish.
“Project 2(04): Objectives”
Construct four models of your Project 2(04) portfolio:
The Step-by-Step Guide to Project 2(04) [presentation] and Project-2(04)-Excel-Template [enable “Macros”] explain-
demonstrate how to construct these four portfolios.
“Deliverables & Submissions”:
(1) One macro-enabled Excel file titled Lastname-Firstname.xlsm
Don’t just copy and re-use the Project-2(04)-Excel-Template. Add “value” by plots, measures of historical
performance, “Categorical Analysis” (example: What is the probability that an equity’s return increase given that the
“market” returns decreased), etc. Students whose “portfolio” numbers in the paper are at variance with the numbers
in the Excel file may be potentially charged with an academic offense.
Submit Excel file through Quercus-project-2-excel-assignment tab
(2) A (max) 5 to 6-page business-report (“paper”) – including a one-page executive summary – and a “technical appendix”
(‘virtually’ no page limit) in a pdf file titled Lastname-Firstname.pdf.
Address the business-report to the Board of Director
This is your opportunity to “make or break” Project 2 (and Test 3). Cross-check and review the
Lectures/Tutorials/Chapters in conjunction with the Project-2(04)-Excel-Template. “Add Value” by, for example,
making a sensitivity table to show the impact of ⋛ on the portfolio and in particular whether it results in a
leveraged portfolio; if you have a leveraged portfolio then describe the “mechanics” of investing; are you
shorting/longing risky assets in the Synthetic Risky Asset; Did you check if “risky asset returns” have a normal
distribution?
The paper should use have minimal jargon and contain salient results/methods; relegate “technical/tertiary” items to
the Technical Appendix.
Submit “paper” through Quercus-project-2-paper-assignment tab and through Crowdmark-
project-2-paper link (will be emailed to students).
“Normally, students will be required to submit their course essays to the University’s plagiarism detection tool for a review of textual
similarity and detection of possible plagiarism. In doing so, students will allow their essays to be included as source documents in the tool’s
reference database, where they will be used solely for the purpose of detecting plagiarism.