DECLARATION OF FITNESS TO SIT EXAMINATION Essays - Investment

DECLARATION OF FITNESS TO SIT EXAMINATION Essays - Investment PLEASE DETACH AND HAND IN THIS PAGE SEPARATELY DECLARATION OF FITNESS TO SIT EXAMINATION Students must complete the information below. Please refer to the front of your examination paper for further information. School (please tick one)Business SchoolLaw School ProgrammeBSc Business Management ExaminationPortfolio Management Date01/05/2015 NameQadeer Niazi I am not aware of any medical or other extenuating circumstances that would impair my performance in this examinationSignature Q.Niazi .. This sheet will be collected by an invigilator during the examination. Please do not leave your desk until it has been collected Table of Contents Q2.3 Q.34 3b. M&S October Long Call4 M&S October Long Put4 References5 THIS IS MONEY5 CRINAGE, S.5 FINANCIAL TIMES5 WEALTHADVISER.CO5 Q2. As the elections are getting close, in the preliminary voting period, it can be said that most of the ambiguity will cause an affect in the foreign exchange market and of course the Sterling, as the clock ticks the value is said to be the most subtle tool for quantifying investors sentiment. Speaking of the reactions of bond markets and equity, it could be said that its unresponsive. Guy Ellison, head of UK equity research at Investec Wealth & Investment, says: Clearly the outcome of the election is uncertain, and markets dont like uncertainty. The bond investors value certainty, but there are high chances for them being disappointed due to the results. There will be improbability about the configuration of the potential referendums and the government, which may tend to cause an increase in the term premium causing a result of rise in the gilt yields. The elections could also cause instability in the interest rates. If for instance the interest rate tends to rise, the prices of bond would subsequently fall causing a simultaneous effect on the GDP, which would lead to a fall in all equity prices. In addition to that, it is expected that there may be a result of fall in new investments due to the instability which could bring pauses in investment plans and cause companies to delay financial investment strategies. Investors will tend to pull back and show lack of interest causing and effect to the stock prices that simultaneously cause uncertainty in the stock market. The Equity market is determined on global developments similar to the bonds, exclusively as a few three quarter of the FTSE 1100 earnings and revenues are spawned from overseas In order to confront such scenarios or at least play safe, a few strategies need to be revised by the investment team/investment managers. The investment managers should broaden the investment in bond markets as is it can be considered as a good option, the managers are recommended to diversify the investment of customers as much as possible. The managers should invest in markets or sectors with a correlation between -1 up to about 0, which shall minimise the risk of making a loss. Q.3 Explain the difference to an investor between holding a long European Call and holding a short European Put position on a companys shares. In a long European call one get the options to purchase shares at the fixed strike on a certain date, however, in the short put option the investor is obliged to buy the share at the fixed rate in the future. The short put is relatively a better option as it gives a higher premium compared to the long call holding. 3b. M&S October Long Call Values Strike price 440equilibrium 430 share 10 If the investor buys M&S long call option, the likely chances of making a loss would be of 0.10 per share which is the premium free of purchasing the long call. M&S October Long Put Value 425.7 strike price Share 10 Equilibrium For the M&S long put share options the investor will be expecting the price of the underlying security will go considerably below the strike price before the expiry date. References THIS IS MONEY Should investors worry about the election outcome? In-text: (This is Money, 2015) Bibliography: This is Money, (2015). Should investors worry about the election outcome?. [online] Available at: thisismoney.co.uk/money/investing/article-3057669/Should-investors-worry-election-outcome.html [Accessed 30 April 2015]. CRINAGE, S. Investment, uncertainty and the 2015 UK General Election [for use with your clients] In-text: (Crinage, 2015) Bibliography: Crinage, S. (2015). Investment, uncertainty and the 2015 UK General Election [for use with your clients]. [online] Commentary & analysis. Available at: http://insights.jpmorgan.co.uk/adviser/commentary-and-analysis/investment-uncertainty-and-the-2015-uk-general-election/ [Accessed 30 April 2015]. FINANCIAL TIMES UK election risk hovers on horizon for markets - FT.com In-text: (Financial Times, 2015) Bibliography: Financial Times, (2015).