代做Cashflow matching portfolio management Assignment 3代做Java语言

Assignment 3: Group stimulation project report

Part 1- Immunisation:  Cashflow matching portfolio management

1.1

The cashflow matching approach to portfolio management:

The cashflow matching approach in portfolio management is the process of cash inflow from investments that aligns with the liabilities. The portfolio manager needs to ensure that the future liabilities match with the securities.

The key issues with using a cashflow matching portfolio management approach:

It can be hard to find bonds that the cash flow matches the liability and may require reinvesting. If cash flows are delayed, liquidity risks can occur.  

Identify and explain some alternative approaches to bond portfolio management:

An active strategy is an alternative approach to investing. Basically, the purpose is to focus on the number of total returns vs eliminating risk.  The immunisation strategy is another, this approach focuses on the rate of return by aiming to achieve a certain amount of investment by the end of a set term. Index strategy is when investors invest bond indices. This technique allows for better control on assets and management of their portfolio. Also, it will allow for less mistakes made by bond managers. It does this by copying the bond index and creating a bigger portfolio. Finally, the passive strategy is when investors hold investments until the end of maturity. An example of this approach is bond laddering- a process where the investment gets divided into equal parts and invested into the investment horizon.

1.2 Construct a bond portfolio using a cashflow matching portfolio management approach.

1. Explain your trading strategy to achieve the portfolio objectives

“A trading strategy outlines the investor’s financial goals, including risk tolerance level, long-term and short-term financial needs, tax implications, and time horizon.” (CFI Team, n.d.). Our trading strategy was a fundamental analysis based off the profitability in all 22 bonds that were assessed. The number of bonds were chosen by analysing the asking price of the bonds in the market and matching this with the liability amount of each year (2024-2035), assuming there is no reinvestment income.

2. Explain the transactions you made, including:

How did you decide the type and quantity of bonds that bought?

The type of the bond was already given. The quantity of bonds was determined based on the asking price of the bond and the amount of credit in the liability fund. For instance, in 2024 a credit amount of $40 million was given, therefore amount of bonds that could be purchased in 2024 had to be less than a total value of $40 million.

How did you decide or choose the quotation for your trading?

Choosing the quotations involved analysing the real time ask price of the bonds. This price was set by the seller and bought at the time of the trade.

What are the key learnings in executing your trading strategy?

The key learnings in executing the trading strategy were that every trade involves a potential risk, and it was an important factor in choosing the number of bonds to invest in.

3. Explain how you have met the requirement to build this portfolio at the lowest possible cost

Building the portfolio at the lowest cost possible involved bidding on the bonds at the asking price (lowest cost the buyer can sell at) and matching this with the number of bonds that were able to be purchased within the budget.

4. Analyse your portfolio outcome

Overall, the analysation of the investment for periods 2024-2035 demonstrate an attractive return on investment. The number of stocks that were able to be purchased ranged from 1,048 to 25,097 in any single bond investment. The price of the bonds ranged from $80.147 to $102.49. For the report, our team analysed the project based off the budgets for each year and concluded with an average return on investment of $5,508.08.