Term Project (AFF410 Section 701E) Each group is assigned to a dataset containing historical prices of Crude Oil spot and Futures prices. ‘CME-CLSpot.xlsx’ file contains the historical closing prices...

Please find attached the assignment for my project. One file is the spot prices the other file is the future quotes. The due date is March 22nd.

Thank you for the help

Term Project (AFF410 Section 701E) Each group is assigned to a dataset containing historical prices of Crude Oil spot and Futures prices. ‘CME-CLSpot.xlsx’ file contains the historical closing prices of Crude Oil spot, to be used for all groups. Each group is assigned to a specific Futures contract that corresponds to the filename. Using the dataset assigned, answer the following questions and provide all answers in a single Excel spreadsheet to be handed in electronically. Use the column names ‘Settle’ for daily closing prices. Spreadsheets should be named as follows: AFF410_W2018_Section701E_Group[x].xlsx. Individual students are also required to submit a separate peer evaluation form in the beginning of the last lecture on Apr 9th, 2018 (use the handout that is posted). 1. How do the spot and futures prices of crude oil differ? The futures basis is defined as the difference between the futures price and spot price (i.e. spot price - futures price). Analyze the futures basis behavior over the life of the futures contract. What implications does this have for the price of crude oil futures options? (Lecture 3) 1. Assume the convenience yield of holding crude oil spot is 1% in continuously compounded annual terms. Compute the cost-of-carry each day and analyze the behavior over the life of the futures contract. (Lecture 2) 1. How does the annual (continuously compounded) return volatility of crude oil compare for futures vs. spot? What implications does this have for the price of crude oil futures options? (Lecture 3) 1. How does the price of a crude oil futures call compare to that of an equivalent crude oil spot call? Specifically, compute and compare the theoretical price of a crude oil spot call and futures call on each trading day over the last two months of the call’s life. Assume that the expiry date of a call option is the closest business date to 15th date of the preceding month of Futures contract expiry month. Assume that the strike price is set to be the closing futures price on maturity, rounded to nearest dollar. Also assume that all options are European style. Any other assumptions made for analysis should be written explicitly (e.g. interest rates). (Lecture 8) 1. What is the impact of futures calls being American rather than European? Compare the theoretical price of a futures call option to that of an equivalent European futures call option on two months from call expiration and one month from call expiration. (Lecture 7) 1. Repeat Q.5 for put options instead of call options with the same strike price. Comment on any differences in analysis between using calls and puts. (Lecture 7) 1. Finally, what trading strategies using crude oil futures options would you recommend given current economic conditions? Notes: 1. No communication is allowed across groups. All submitted reports and spreadsheets will be checked for plagiarism. 1. Groups must use the futures contract assigned to them in their analysis and may not make use of any information that was not publicly available as of the (assumed) report date. 1. Submitted spreadsheets may not contain any external links and must show ALL calculations. No VBA or macros are permitted in spreadsheets and calculations should be properly identified so that they can be followed easily. 1. Make sure to justify properly all major assumptions and the recommendations in your report. 1. The grade for each group will be determined as follows: Presentation and qualitative analysis4 Numeric analysis6 Total10 1. Individual grades will be adjusted for peer evaluations according to a pre-set formula. Only the overall grade for each group will be reported on D2L in order to maintain strict confidentiality of peer evaluations. Appendix: Convention for denoting each month in Futures market F - January G - February H - March J - April K - May M - June N - July Q - August U - September V - October X - November Z - December For example, CME-CLF2000 refers to the CME NYMEX WTI Crude Oil Futures expiring on January, 2000.