ASSIGNMENT DESCRIPTION
Students are requested to critically address the following points:
Describe the US$/Euro exchange rate dynamics all through the 2019-2021 timespan: what explains this trend?
Assuming you were a European trader, explain how straddles and strangles could have been used to hedge a long USD-denominated position held in Jan 2020. Please, support your claims with a preliminary theoretical overview followed by a practical example (25 points)
Describe the GBP/Euro exchange rate dynamics all through the 2016-2021 timespan: what explains this trend?
Assuming you were a European trader, explain how futures contracts could have been used to hedge a long GBP-denominated position in the aftermath of the Brexit referendum. Please, support your claims with a preliminary theoretical overview followed by a practical example (Hint: do not forget the daily Mark-to-Market procedure) (25 points)
Assess the effectiveness ultra-expansionary fiscal and monetary policies, with particular attention to highly indebted countries like Italy: as a bond trader, describe how interest rates dynamics and bond duration/convexity are all intertwined. Support your analysis with a practical example and do not forget to refer to the theoretical framework discussed in class (25 points)
On the background of what you have described above, try to assess which countries, sectors or asset classes you would recommend (or NOT recommend) to portfolio managers for the next 12 months (25 points)
