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INVESTMENT OPTIMIZATION

SOLUTIONS. M. M. INVESTMENT OPTIMIZATION. SYST 798/OR 680 Capstone Project Proposal Lee Vorthman Isaac Rusangiza Kindle Fell Erik Adamson. M. M. Project Proposal. Investment Optimization

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INVESTMENT OPTIMIZATION

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  1. SOLUTIONS M M INVESTMENT OPTIMIZATION SYST 798/OR 680 Capstone Project Proposal Lee Vorthman Isaac Rusangiza Kindle Fell Erik Adamson

  2. M M Project Proposal • Investment Optimization • Problem: There is currently no known mathematical model used for selling future stock options – presently accomplished with vast market experience and general “feel” for futures behavior • Goal: Determine a method/strategy for optimizing investment return with index future options • A way to theoretically achieve a reasonably high probability of making money from an investment through sales of both calls and puts • Put – As the seller, betting an option will increase/stay the same • Call – As the seller, betting an option will decrease/stay the same • Limited to S&P 500 index future options

  3. M M Project Proposal • Suggested Methods/Strategies • Short Straddle Option Strategy • Black-Scholes Model – market data • Arbitrage Pricing Theory • Characteristics to consider • What price above and below strike price to offset gains and losses • When to sell • Sit and wait versus dynamically buying and selling in response to market activity

  4. M M Project Proposal • Planned Approach • Propose a solution Model • Simulation • Using common programming language or software (MatLab, Arena, Java, Analytica) • Find appropriate data or data model • Continue using Spiral Development • Refine Model and repeat

  5. M M Project Proposal • Planned Deliverables • CONOPS • Problem Statement • Market Analysis/research • Scope • Stakeholder Analysis • Top level requirements • Schedule (Gantt Chart) • Business Case/Justification • Simulation Model • Process Model/Description

  6. M M Project Proposal • Next Steps • Project approval • Determine high-level requirements and constraints to judge any method or model being considered • Further research on futures investment • Continued interaction with primary stakeholder / sponsor (Prof. Chang) • Definition of Success (ROI, Risk vs. Return) • Find appropriate set of data for modeling purposes • Simulation and Test Plan • Further research on suggested strategy while searching for possible alternatives

  7. M M Project Proposal Questions?

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