Question
Assuming riskless arbitrage opportunities do not exist, one cannot expect to have a return greater than the risk-free rate without taking on some risk. In
Assuming riskless arbitrage opportunities do not exist, one cannot expect to have a return greater than the risk-free rate without taking on some risk. In order to obtain greater returns on investments, the investor must be willing to take on greater risk. As many of us can imagine, all of the stocks traded in the stock market do not move together. In general, there are some stocks that tend to move together, some that move in opposite directions, and others that seem to have no relation to one another. You feel confident in your investment knowledge and would like to invest into Malaysian stock market and Malaysian derivative market. You feel that the market is about to enter a period of bull. Given the above scenario, you are required to answer the following questions based on this module content outline: (a) Assume that you invest into Malaysian stock market. On 3 May 2021, you construct an investment portfolio. State the reason(s) for selecting those financial assets available in the Malaysian stock market. (10 marks) (b) To prevent the unknown decline from hurting the capital invested in the investment portfolio constructed in Question (a), you are now also involved into the Malaysian derivatives market. Using a numerical example, show and explain the trading strategy that you would apply on financial assets available in the Malaysian derivative market in order to meet your objective effectively and efficiently. (23 marks) (c) Explain how the trading of stocks or derivatives could lead individual and institutional investors to bankruptcy. Describe how the risks occurred in the whole trading process in Questions (a) and (b) are managed by the financial intermediaries. (17 marks)
especially what are some of trading strategy in investing derivative market and stock market?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
In the context of the Malaysian stock market selecting financial assets for your investment portfolio on May 3 2021 can be influenced by various factors a Reasons for selecting financial assets in the ...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started