讲解 BAFI1026 Derivatives and Risk Management Assessment 2 – Task 1 – Individual Trading Session #1讲解

Session Name	Week	Weekday	Date	Time	Instructor	Location
WRK01/02	5	Tuesday	1 April 2025	9:30 AM - 12:30 PM	Hoa Phan	080.04.012 & 080.04.014
WRK01/04	5	Tuesday	1 April 2025	12:30 PM - 3:30 PM	Obaid Awan	080.04.012 & 080.04.014
WRK01/01	5	Wednesday	2 April 2025	9:30 AM - 12:30 PM	Ha Truong	080.04.012 & 080.04.014
WRK01/05	5	Thursday	3 April 2025	9:30 AM - 12:30 PM	Obaid Awan	080.04.012 & 080.04.014
WRK01/03	5	Thursday	3 April 2025	2:30 PM - 5:30 PM	Ha Truong	080.04.012 & 080.04.014

You will stay in the selected session for the trading sessions in both Week 5 and Week 9. Attend your selected dealing session in Week 5. Use your email address to create an account with CME Group, during the workshop.

● Your instructor will use 1.5-2 hours to go through the task, elaborate the basic specs of Energy future products, explain the trading rules, and demonstrate how to trade. You can start trading after the instructor’s demonstration.

● Your trading is to primarily hedge your risk exposure to the oil price.

● For students, whose student number ends with odd number, assume you are treasurers at airline company, and you are going to buy 12,000 barrels of jet fuel oil in 3 months. For students, whose student number ends with even numbers, assume you are jet fuel oil producer, and you are going to sell 12,000 barrels of jet fuel oil in 3 months. You aim to use Energy Futures products to hedge your price risk. Record the fuel price when they start to take positions on CME, to 1) provide background information about/justify how many contracts you go long/short, 2) show whether you succeed in hedging risk.

● You have $100,000 USD cash on hand at the beginning of your trading. You must hedge the risk to reduce it to a minimum. You must hedge at least 60% of the risk using Energy futures. For the remaining 40%, you may use any futures product, including Energy futures.

● You can trade any time after your instructor’s demonstration, till any date before 28 April 2025. However, you need to trade for at least one week (i.e., you need to start trading at least one week before the deadline), ideally more than two weeks to observe the market fluctuation.

● You can trade as many times as you want if you can justify your trading philosophy. You can do some trials at the beginning of the trading period to get familiar with the platform. When you decide to officially start to implement your strategy, please do not reset the game before your last trading date.

Note: Please remember to leave some time to consolidate your trading record and report. For example, someone wants to stop trading on 23 April 2025 and prepare the excel and report between 23-25 April, some others want to trade till 25 April and prepare the report and excel for several hours or weekend. Both are good if you are confident about your submission quality.

● You can take both long and short positions in future contracts. Your orders might be rejected by the system because of margin shortage or market closing. When your account balance drops to near zero, you are out of the game.

● Please use the excel template to record your trading and balance daily, and whenever you make a trade. It is not necessary to flatten (close out) all your open positions on your last trading date. It is good practice to keep a record of your daily account balance, profit, loss, and open positions to facilitate consolidating your report. Please do note that the template is just a basic version provided by the teaching team, feel free to modify it to satisfy your needs.

● Based on your trading history, profit/loss from your future account, and the income/cost from your physical asset, you need to form. a report to summarize your trading exercise.

Note: Since the contracts can’t be bought in a fraction, a tiny variation from the specified budget is acceptable. You can choose to hold more Cash if you believe the investment opportunity is not good enough but also need to justify this decision in your report.

Ø CME Institute Trading Simulator

The Trading Simulator replicates live futures markets by leveraging real market data. A constant stream of new prices informs your strategies for CME Group’s top products across all 6 asset classes, including Bitcoin and Micro E-mini futures. Access to the simulator is free, all you need is a CME Group Login account, which can be created using your own email. Please create an account before or during the workshop.

Ø Marking Guide

Your report must include the following sections:

1. Trading objectives:

Give an overview of your trading objectives.

2. Summarize your hedging strategy:

Provide a summary of how you use future products to hedge your commodity price risk. The content should include but not limited to:

· What is the current market situation? Do you think it is necessary to hedge your jet fuel price risk, and what percentage of your exposure you think you should hedge (e.g., ?% out of the 12,000 barrels)

· Which future product(s) you use to hedge your risk, outline their basic specs?

· What strategy you employed to hedge (e.g., delivery month, contract price, contract amount, long or short, etc)?

· What is the performance of your hedging by the end of your last trading date? And how the spot price change for jet fuel oil?

· Are there any differences between jet fuel oil and the underlying assets of your selected hedging product? And what risk can be generated from these differences?

Total=15 marks

Ø Submission

All submissions must be made electronically on Canvas, accompanied by a cover sheet. The submission must be using 1 or 1.5 spacing and 12-point Times New Roman font. Work that fails to meet these specifications will not be accepted. Students should ensure that the report is free from problems like copying and plagiarism.

The report and excel spreadsheet will be submitted through “Canvas-Assignments-Assessment 2: Individual Trading Session 1 – Report submission”. You can submit multiple times before the due date. The report should be no longer than 1000 words (-/+ 15%), excluding references and appendix. The student can have up to two pages appendix. Citation and references should be provided where necessary. The Excel file contains your workings to support the reported analysis.

Students must keep back-ups of all submitted work in case any are lost.

Note:

● This instruction includes suggestions on items to include in the report, more information for parts you think are important may be included as you feel necessary, keeping in mind the word limit.

● The teaching team is not supposed to comment on your calculation workings or identify where your calculation mistakes. The teaching team will provide guidance to make sure that you are on the right track. However, it is still your responsibility to investigate your work and identify the errors.

Ø Additional Resources:

1. CME Group:

https://www.cmegroup.com/

2. Jet Fuel Price Monitor

https://www.iata.org/en/publications/economics/fuel-monitor/

3. Oil Price

https://oilprice.com/oil-price-charts/#WTI-Crude

4. A proxy for risk-free rate such as 3-month treasury bill can be found here: https://fred.stlouisfed.org/series/TB3MS

5. S&P 500 index historical performance

https://au.finance.yahoo.com/quote/%5EGSPC/history?p=%5EGSPC

6. If you need more resources, try Google first

Ø Extension and Special Consideration Policy

Unless extension is granted, severe penalties apply for late submission. For late submission, the mark awarded will be reduced by 10% for each day (2 points) the submission is late. Submissions that are late by 5 days or more will not be marked and zero marks will be awarded.

If you are prevented from submitting an assessment on time by circumstances outside your control, you may apply in advance for an extension to the due date of up to seven calendar days. You must apply for an extension at least one working day before the assessment deadline.

Ø Apply for extension:

Use the Assessment Extensions Tool below the Assessments Tab on Canvas course page by 25 April 2025 at 11:59AM.

or

Download and complete an Application for extension of time for submission of assessable work form. (PDF) and submit it to the RMIT School that runs the course and to the course coordinator.

If you are applying for an extension on or after an assessment due date and/or requiring an extension of greater than seven days, you must apply for Special Consideration. Appropriate supporting documents, such as a medical certificate in case of illness, should be provided. However, if you have an equitable assessment arrangement that provides for negotiation of submission dates with relevant academic/teaching staff, extensions of more than seven days may be considered.

Marking Rubric (15 marks)
	80%-100%	60%-80%	40%-60%	20%-40%	0%-20%
Trading objective (1.8 marks)	Trading objectives are clearly identified and summarized without errors. Issue/problem to be considered critically is stated clearly and described comprehensively, delivering all relevant information necessary for full understanding	The majority of the trading objectives are clearly identified and summarized without errors. Issue/problem to be considered critically is stated clearly and described, delivering some relevant information necessary for full understanding	Part of the trading objectives are clearly identified and summarized with some errors. Issue/problem to be considered critically is stated clearly and described, delivering some relevant information necessary for full understanding	Trading objectives are not clearly identified and summarized with some errors. Issue/problem to be considered critically is stated and described, delivering some relevant information necessary for full understanding	Do not provide discussion on trading objectives
Trading strategy (4.5 marks) #AoL3a Adaptive: Constructs solutions based on comprehensive theoretical knowledge	Transactions are clearly and well planned to achieve the objectives, well considering the complexities of the economy. Well-justified assumptions are provided Explain what products were sold or bought, demonstrating the excellent understanding of how future works	Transactions are clearly planned to achieve the objectives, considering the complexities of the economy. Justified assumptions are provided Explain what products were sold or bought, demonstrating the good understanding of how future works	Transactions are planned to achieve the objectives, some consideration on the complexities of the economy. Assumptions are provided but not well supported Explain what products were sold or bought, demonstrating an understanding of how future works	Transactions are planned to achieve the objectives, no consideration of the complexities of the economy. Limited assumptions are provided and not well supported Explain what products were sold or bought, but lack of understanding of how future works	Transactions are not planned to achieve the objectives, no consideration of the complexities of the economy. No assumptions are provided and not supported Do not explain what products were sold or bought, lack of understanding of how future works
All transactions/deals are clearly recorded, reported and explained (3.6 marks) #AoL4 Digitally Adept: Data Management & Analysis.	Demonstrate proficiency in using the trading platform, understand how margin works Transaction and position records are well and clearly presented in excel without errors All transactions are clearly explained	Demonstrate ability in using the trading platform, understand how margin works Transaction and position records are clearly presented in excel without errors Majority of transactions are clearly explained	Demonstrate ability in using the trading platform, understand how margin works Transaction and position records are presented in excel but hard to understand or with errors Part of transactions are clearly explained	Demonstrate ability in using the trading platform, show limited understanding on how margin works Not all of the transaction and position records are presented in excel but hard to understand or with errors Majority of transactions are not clearly explained	Do not show ability in using the trading platform, no understanding on how margin works Transaction and position records are not presented in excel or full of errors Transactions are not clearly explained or not matched with the report
Performance is clearly analyzed (3.6 marks)	Profit and loss are excellently clearly reported and concluded Excellent analysis is provided to explain the performance, linking to the real-word markets Key learnings are reflected and go beyond the knowledge from class	Profit and loss are clearly reported and concluded Good analysis is provided to explain the performance, linking to the real-word markets Key learnings are reflected	Majority of the profit and loss are clearly reported and concluded Enough analysis is provided to explain the performance, but limited link to the real-word markets Key learnings are mainly reflected	Profit and loss are reported and concluded, but with errors. Insufficient analysis is provided to explain the performance, failing to link to the real-word markets Key learnings are not fully reflected	Profit and loss are not reported and concluded, with errors. Limited analysis is provided to explain the performance, failing to link to the real-word markets Key learnings are not fully reflected
Format and Information source (1.5 mark)	The report is well organized and clearly written. The underlying logic is clearly articulated and easy to follow. Words are chosen that precisely express the intended meaning and support reader comprehension. Diagrams or analyses enhance and clarify the presentation of ideas. Sentences are grammatical and free from spelling errors. The report follows designated guidelines. Citations and references are used appropriately. The report is the appropriate length as described for the assignment.	The report is organized and clearly written for the most part.  In some areas, the logic or flow of ideas is difficult to follow. Words are well chosen with some minor exceptions. Diagrams are consistent with the text. Sentences are mostly grammatical, and only a few spelling errors are, present, but they do not hinder the reader. The report follows designated guidelines. Citations and references are used appropriately. The report is the appropriate length as described for the assignment.	Meaning is generally made clear through mostly correct and appropriate formal academic style, grammar, vocabulary, punctuation and spelling. Paragraphs generally have topic sentences and are adequately developed, coherent and logical	Meaning is generally made clear through adequate and appropriate formal academic style, grammar, vocabulary, punctuation, and spelling; some lapses causing lack of clarity. Some but not all paragraphs have topic sentences and are adequately developed, coherent and logical	Meaning is impeded through frequent use of informal language and errors in grammar, vocabulary, punctuation, and spelling. Paragraphs lack topic sentences and are inadequately developed with poor coherence of ideas and irrelevant information