Investment optimization
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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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Investment optimization

SOLUTIONS

M

M

INVESTMENT OPTIMIZATION

SYST 798/OR 680

Capstone Project Proposal

Lee Vorthman

Isaac Rusangiza

Kindle Fell

Erik Adamson


Project proposal

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


Project proposal1

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


Project proposal2

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


Project proposal3

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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


Project proposal4

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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


Project proposal5

M

M

Project Proposal

Questions?


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