Dartmouth College, Fall 2017

Mathematical Finance I, Math 86 S. Nanda

Assignment∗ Due: Nov 10, 2017 in class

This will count as one homework. You may work in pairs (one submission for each pair).
The purpose of this exercise is to familiarize you with looking up securities and their prices.
You will make theoretical investments and keep track of these.
Assume that you are given $2000 to invest in an appropriate portfolio starting today.
The portfolio can consist of any combination of the following:

1. Stocks

2. Bonds

3. Vanilla European Calls or Puts

4. Forwards

5. Cash

Assume that the risk-free interest rate is 2% per annum. Use continuous compounding. You
are allowed to borrow (short a bond) upto $4000 or lend money. You can also do short selling
(at no cost). The investment period is through November 6, 2017. Your investments must
be from actively traded investments in the market and not made up. Prices you use should
be quoted prices. During this period you can trade any number of times. You may write
your own calls and puts but justify prices you use (since you will not be trading them).

Maintain an excel spreadsheet detailing your trades and the dates on which you do the
trades. On each Friday mark your portfolio to the market. This means evaluate your
portfolio at current narket prices. Record these. Your spreadsheet should reflect your net
position on a weekly basis.

Upload your spreadsheet on Canvas by Sept 30, with your initial portfolio. Submit your
weekly updates on Oct 6, 13, 20 an 27, by end of day, on Canvas - I would like to see these.
Submit your final spreadsheet showing the net position on Canvas on November 10, 2017.