Date of Publication

1-2021

Document Type

Master's Thesis

Degree Name

Master of Science in Computational Finance

Subject Categories

Finance and Financial Management

College

Ramon V. Del Rosario College of Business

Department/Unit

Financial Management

Thesis Adviser

Ildemarc C. Bautista

Defense Panel Chair

Robert Ramos

Defense Panel Member

Dioscoro P. Baylon
Joseph James F. Lago

Abstract/Summary

The purpose of this project is to create a tool for users to recognize investments in a portfolio of stocks traded in the Philippine stock market and corresponding price return index swap, paying Philippine Stock Exchange index (PSEi) and receiving a fixed rate, to its fair value and calculate the profit and loss, using Excel and VBA program. This paper illustrates indexing as an investment strategy, which involves the investment in a portfolio of stocks that mimic the performance of a market index, and the concept of hedging with equity swap derivative contract used to hedge stock positions or vice versa, which is usually done to manage the risk exposures, such as market fluctuations. This tool can be used as an extension of the Graduate Project Paper of A. Layson (2019) entitled: “The Art of Goal Programming Model: A Tool for Strategic Decision Making in Outperforming the Philippine Stock Exchange Index,” where a portfolio of stocks was obtained using the goal programming approach. The users of the tool should be able to enter stock trades, trade cost, swap notional, swap reset schedule and reference rates, among others, and calculate the fair values of the securities and the profit and loss for a given range of stock, index prices and yield curve. While there are no investment opportunities in the Philippine derivative market for dealers and investors to engage in swap transactions, particularly in equity market, this tool is useful for trying out stocks versus index swap hedging strategies.

Abstract Format

html

Language

English

Format

Electronic

Keywords

Stock exchanges—Data processing; Swaps (Finance)

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Embargo Period

8-10-2022

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