Event Title

Risk Maximization of Metal Futures through the Usage of Derivative Strategies

Session Number

F11

Advisor(s)

Marc De Muart, TransMarket Group LLC
Adrian Jaronczyk, TransMarket Group, LLC

Location

B-110

Start Date

28-4-2016 12:45 PM

End Date

28-4-2016 1:10 PM

Disciplines

Computer Sciences

Abstract

When using financial instruments, traders look for the best possible methods for maximizing the risk they undertake. Many different strategies have been developed to accomplish this goal. This project focuses on a single strategy, the calendar spread, analyzing which types of calendar spreads maximize risk and reward for over 500 contracts on a three year period. Financial tools such as Bloomberg Terminal and Transmarket Group's Modeling Tools were used to model each of these strategies and implementation was done with Visual Basic for Applications, in conjunction with Python and Microsoft Excel. After modeling the different types of calendar spreads for 6 different metals, a best model was determined that matched the performance of the market itself best, looking at the volatility and rate of return as these are the primary factors that determine the viability of a trading strategy. Further back-testing of the model over a different time horizon may change this conclusion, as a different market environment will yield different results. In conclusion, there is no real best type of spread, but certain types of spreads are more suitable for certain investors.


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Apr 28th, 12:45 PM Apr 28th, 1:10 PM

Risk Maximization of Metal Futures through the Usage of Derivative Strategies

B-110

When using financial instruments, traders look for the best possible methods for maximizing the risk they undertake. Many different strategies have been developed to accomplish this goal. This project focuses on a single strategy, the calendar spread, analyzing which types of calendar spreads maximize risk and reward for over 500 contracts on a three year period. Financial tools such as Bloomberg Terminal and Transmarket Group's Modeling Tools were used to model each of these strategies and implementation was done with Visual Basic for Applications, in conjunction with Python and Microsoft Excel. After modeling the different types of calendar spreads for 6 different metals, a best model was determined that matched the performance of the market itself best, looking at the volatility and rate of return as these are the primary factors that determine the viability of a trading strategy. Further back-testing of the model over a different time horizon may change this conclusion, as a different market environment will yield different results. In conclusion, there is no real best type of spread, but certain types of spreads are more suitable for certain investors.