BAFI3272: The cashflow matching approach to portfolio management: Debt and Money Markets Report, SIM, Singapore

Assessment Taks

Part 1 – Immunisation: Cashflow matching portfolio management          

Part 1.1: Provide an explanation of the following:

• The cashflow matching approach to portfolio management.
• The key issues with using a cashflow matching portfolio management approach.
• Identify and explain some alternative approaches to bond portfolio management.

Part 1.2: Construct a bond portfolio using a cashflow matching portfolio management approach. This activity was undertaken in the Week 11 workshop.

1. Explain your trading strategy to achieve the portfolio objectives
2. Explain the transactions you made, including:
   • How did you decide the type and quantity of bonds that you bought?
   • How did you decide or choose the quotation for your trading?
   • What are the key learnings in executing your trading strategy?
3. Explain how you have met the requirement to build this portfolio at the lowest possible cost.
4. Analyse your portfolio management outcome

Your overall report should include at a minimum:

• All bond price screenshots from LSEG Workspace (In appendix) from the Week 11 workshop.
• The ‘ Liability and Asset Chart’ from the Bond Portfolio – Cashflow Matching Immunisation.xlsx Excel (In appendix and/or body of your assignment) from the Week 11 workshop.

Appropriate screen shots of the detail of the Assets purchased in the portfolio (In appendix) from the Week 11 workshop

Part 2 – A future yield curve scenario

Use your knowledge of the determinants of interest rates (Week 7 lecture material and tutorial) to forecast future yield curves for Australian Government Bonds (see forecast dates below). The basis for your forecasts will be a qualitative assessment of the projected macroeconomic context. Your report should include a description and justification for all assumptions used in the analysis