New derivative prodcuts are introducted to the market everyday. Some products are not necessarily traded on the exchange such as forward contracts. In this task each student is asked to design a new derivative product. You are not required to use exchange traded assets as underlying assets, but the fair price of the asset should be available. Try to come up with original ideas.

Questions to answer 1) type of derivative, specification of a contract needs to be provided (2marks) 2) provide an analysis of the underlying asset related to your product (2marks) 3) explain what benefits your product has and which type of investors will be interested in your product (2marks) 4) assume an investor opens a long position worth 1mil AUD by using your product by 1st April 5) calculate the return for your investment strategy assuming the contact is closed 1st may 22-you are given the following three cases. provide results:

a) price of underlying assets stays the same from 1st April to may 1st b) price of underlying assets prices increases by 1 standard deviation of the historical volatility on 1st may 22