Teaching with the FTS Real Time Cases
©2010 OS Financial Trading System
This is primarily achieved through
Projects and the Analytical Support System
A major strength is the interactive analytics.
Default inputs are provided but students are encouraged to override with their
own assessed inputs.
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Diversification,
CAPM, and Portfolio Construction/Analysis
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DOW case, S&P 100 case, Euro STOXX 50 case, ASX50 case
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US Sector ETF case
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Global ETF case
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Example:
Form a portfolio and understand measures of risk and return
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Example:
How does CAPM apply to the portfolio problem (refining forecasts of expected
return)
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Example:
Create a tracking portfolio, manage its risk and return relative to benchmark
Understand risk, return, performance measures, rebalancing
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Example:
Global Diversification
See if global strategy can outperform domestic benchmark
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Equity valuation
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DOW case, S&P 100 case, Euro STOXX 50 case, ASX50 case, ...
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Example: Free Cash Flow to Equity
We provide a template: calculating FCFE from financial statements, estimating discount rates, etc.
Students then have to apply the technique to actual companies
Work through financial statements
Could be in groups, could analyze 2-3 different types of companies
Come up with their own estimates, input into the analytic support system
Based on analysis, develop a (simple) trading strategy
Could then repeat with a different model, evaluate differences between models
Could compare to analyst forecasts, etc.
Trading motivates the analysis
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Equity Futures: arbitrage, hedging
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S&P 500 futures case
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Example: Arbitrage futures of different maturities
Requires modeling of basis
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Example: hedge underlying position using futures
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Equity Options: hedging and risk management, arbitrage, volatility trading
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S&P 100 options, S&P 500 options, DJX options, VIX options
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Example: managing volatility risk
Using options on S&P 500
Using VIX options
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FX currency trading, exchange rate risk
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Spot FX, FX options, FX futures
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Example: managing currency risk
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Example: carry trades
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Interest rate risk
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Bonds, Euro dollar futures, Fed funds futures
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Example: Hedging Interest Rate Risk
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Example:
Deriving information about monetary policy from Fed Fund Futures
Virtually any textbook problem can be made into a current real time project
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Students analyze the problem
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Create their own estimates of analytic parameters
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Implement into the system
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Analyze the performance
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Students acquire relevant real world experience whilst learning