Concept Paper
Isleidy Ramos
22SP-PH785-151
6/2/2022
Proposal
People's lives and health have been devastated by the COVID-19 pandemic. The economic downturn has been caused by the efforts taken to contain the virus. Uncertainty surrounds its severity and duration at this point. An increase in the severity of the financial crisis might have an impact on global financial stability according to the most recent Global Financial Stability Report. Risk assets' prices have plummeted since the pandemic's onset. Risk assets have fallen by 50% or more during 2008 and 2009, which was the height of the recent selloff. For example, many equities markets have experienced losses of 30% or more at the bottom of the market. Credit spreads have risen sharply, particularly for companies with weaker ratings. Short-term funding markets, particularly the global market for US dollars, have also shown signs of stress.
This has left many residents on the verge of being forcefully evicted from their houses into the streets. The federal government 2-year eviction moratorium has already expired, and landlords are coming forward to file eviction cases. Reports identify that the judiciary is receiving more than 2000 eviction cases every week, revealing the seriousness of the issue. Statistics further reveal the devastating impact of the pandemic on the housing crisis in NYC by highlighting that over 596,000 families are remaining behind on rent. There were more than 110,000 cases of eviction filed during the pandemic (Cohen, 2021). Consequently, the risk of eviction and rent debt continues to threaten people of color residing in NYC. Further evidence reveals that the mission to bail out the indebted residents is experiencing revenue gaps which is threatening the ability of the real estate market to accommodate the low-income earners around the city and also those who have been suspended from their current place of work (Rahmaniani and Mohammadmoradi, 2021).
Problem Statement
a. What is the problem -Description of the problem?
As the pandemic continued to worsen towards the middle of the year, many residents were willing to leave the city to embrace suburb life as they found it more affordable and could acquire spacious spaces (Suyin Haynes, 2020) With many vacant houses, the landlords came up with the initiative to lower rental prices to attract more residents to mitigate the increasing number of empty homes.
b. Why is it a problem?-the basis of the problem
Current literature reveals that although this motive encouraged many people to take advantage of the reduced prices, many suffered from the risk of eviction as the rental prices soon increased (Cohen et al., 2021). Many renters were yet to receive their jobs back after being suspended from mitigating the pandemic.
c. What is the magnitude of the problem:
Research shows that although the housing crisis and rent unaffordability were still present before the pandemic, as the city had recorded a 59% incre ...
EXERCISE 27I WILL SEND THE DATA TO WHOM EVER WILL DO THE ASSIGNMEN.docx
Concept PaperIsleidy Ramos 22SP-PH785-151
1. Concept Paper
Isleidy Ramos
22SP-PH785-151
6/2/2022
Proposal
People's lives and health have been devastated by the COVID-
19 pandemic. The economic downturn has been caused by the
efforts taken to contain the virus. Uncertainty surrounds its
severity and duration at this point. An increase in the severity
of the financial crisis might have an impact on global financial
stability according to the most recent Global Financial Stability
Report. Risk assets' prices have plummeted since the pandemic's
onset. Risk assets have fallen by 50% or more during 2008 and
2009, which was the height of the recent selloff. For example,
many equities markets have experienced losses of 30% or more
at the bottom of the market. Credit spreads have risen sharply,
particularly for companies with weaker ratings. Short-term
funding markets, particularly the global market for US dollars,
have also shown signs of stress.
This has left many residents on the verge of being forcefully
evicted from their houses into the streets. The federal
government 2-year eviction moratorium has already expired,
2. and landlords are coming forward to file eviction cases. Reports
identify that the judiciary is receiving more than 2000 eviction
cases every week, revealing the seriousness of the issue.
Statistics further reveal the devastating impact of the pandemic
on the housing crisis in NYC by highlighting that over 596,000
families are remaining behind on rent. There were more than
110,000 cases of eviction filed during the pandemic (Cohen,
2021). Consequently, the risk of eviction and rent debt
continues to threaten people of color residing in NYC. Further
evidence reveals that the mission to bail out the indebted
residents is experiencing revenue gaps which is threatening the
ability of the real estate market to accommodate the low -income
earners around the city and also those who have been suspended
from their current place of work (Rahmaniani and
Mohammadmoradi, 2021).
Problem Statement
a. What is the problem -Description of the problem?
As the pandemic continued to worsen towards the middle of the
year, many residents were willing to leave the city to embrace
suburb life as they found it more affordable and could acquire
spacious spaces (Suyin Haynes, 2020) With many vacant
houses, the landlords came up with the initiative to lower rental
prices to attract more residents to mitigate the increasing
number of empty homes.
b. Why is it a problem?-the basis of the problem
Current literature reveals that although this motive encouraged
many people to take advantage of the reduced prices, many
suffered from the risk of eviction as the rental prices soon
increased (Cohen et al., 2021). Many renters were yet to receive
their jobs back after being suspended from mitigating the
pandemic.
c. What is the magnitude of the problem:
Research shows that although the housing crisis and rent
unaffordability were still present before the pandemic, as the
city had recorded a 59% increase in the number of occupants in
the city's shelter between 2009 and 2019, the pandemic has
3. played an integral part role in exacerbating the issue. In
connection to this, the pandemic is blamed for intensifying
economic inequality margins and housing prices.
Preliminary Literature Review
This evidence reveals the challenge that is lying ahead for the
real estate market to overcome. It also shows the dilemma that
the residents are currently facing, where they are left with the
option of remaining on the property illegally or ending up on
the streets with their families. The residential real estate market
in New York City is still being transformed by the new
Coronavirus. There was a significant difference in the number
of deaths and cases in New York City during the early 2020
pandemic outbreak compared to other areas of the United States
because it is a densely-populated area. Domestic revenue levels
and trends, as well as foreign flows to developing economies,
were already deemed insufficient to meet the Sustainable
Development Goals prior to the COVID-19 crisis occurring
(SDG). Low- and intermediate countries may find it difficult to
fund their public health, social, and economic responses to
COVID-19 because of their high levels of public debt and the
added strains caused by the pandemic on all key sources of
development finance. Observations so far point to large-scale
loan and equity flows from developing nations, which are
occurring in tandem with a decline in remittances and are
having a ripple impact on domestic finance. Increased
likelihood of catastrophic setbacks, which in turn increases our
vulnerability to pandemics and climate change and other
international public calamities such as Ebola and ISIS. While
tax revenues remain the only long-term feasible source of
funding for many government services, no single source of
project financing can take on this problem alone. Official
development finance is a key countercyclical driver. The study
will use literature analysis as the methodology to analyze other
researchers' opinions on the issue and the recommended
strategies that can be followed to navigate the problem
comprehensively. The literature analysis will also provide
4. insights into the extremity of the housing crisis and the
pandemic in NYC. The study aims at analyzing the issue of
increasing housing crisis in New York City during the pandemic
and the impacts the situation is having on tenants, landlords and
the real estate market in general.
2. Goal Statement
The goal of the paper is to establish the impact of Covid-19
pandemic. This will assist in enhancing a deeper understanding
on the financial implications of the pandemic particularly after
the government shifted more focus on the containment of the
pandemic.
3. Methodology
The study will utilize quantitative research in collection and
analysis of data.
References
Cohen, J., Friedt, F., & Lautier, J. (2021). The Impact of the
Coronavirus Pandemic on New York City Real Estate: First
Evidence. University of Connecticut School of Business
Research Paper No. Forthcoming.
Rahmaniani, Y., & Mohammadmoradi, A. (2021). Evaluative
model of effective and influential factors on the quality of
small-scale apartment units in metropolitan areas. Journal of
Sustainable Architecture and Urban Design, 9(1), 149-131.
Suyin Haynes (2020). COVID-19 is prompting wealthy people
to move out of cities. the plague had the same effect hundreds
of years ago. The New York Times.
Money Spread (Bull-Call)Strike1Strike2X1X2Instrinsic
6. This is from
https://finance.yahoo.com/quote/WMT/options/
In Yahoo Finance you can find the option prices and strikes
for other stockshttps://finance.yahoo.com/quote/WMT/options/
These possible stock prices
must be arranged from lower to higher
Strike and Premium (Last Price)
Money Spread (Bull-
Put)X1X2DCRBJune125./130STP1P2ProfitsContractDCRB
130P1(t0)P2(t0)11.514.25Steps1Calculate the intrinsic value of
put optionsTHIS IS A PUT BULL SPREAD2Calculate the profit
of our portfolio (Bear Spread)3Adjust for contract size
Spread
Contract
Money Spread (Bear-
Put)StrikesX1X2DCRBJune125./130STP1P2ProfitsContractDCR
B 130PremiumsP1(t0)P2(t0)11.514.25Steps0Buy High
StrikeSell Low StrikeTHIS IS A PUT BEAR
SPREADSteps1Calculate the intrinsic value of put
options2Calculate the profit of our portfolio (Bear
Spread)3Adjust for contract size
Spread
Contract
Money Spread (Bear-
Call)STRIKESX1X2DCRBJune125./130STC1C2ProfitsContract
DCRB 125PREMIUMSC1(t0)C2(t0)13.511.35Steps1Calculate
the intrinsic value of call optionsTHIS IS A CALL BEAR
SPREAD2Calculate the profit of our portfolio (Bear
7. Spread)3Adjust for contract size
Spread
Contract
CollarCallPut PriceInitial S
PLongStock13.6513.65125.94LongPutShortCallK Price
Robinson: Robinson:
Call Strike Price
K Price
Robinson: Robinson:
Put Strike Price136.165120SellingBuyingBuyingCall ValuePut
ValueSTCall ProfitPut ProfitStock ProfitOverallContractStock
*100Steps1Calculate the intrinsic value of options and gains
from stockTHIS IS A COLLAR2Calculate the profit of our
portfolio 3Adjust for contract size
Butterfly
SpreadX1X2X3DCRBJune120125130C1(t0)C2(t0)C3(t0)1613.5
11.35BULL SPREADBEAR
SPREADSTC1C2ProfitsContractC2C3ProfitsContractButterflyS
teps1Calculate the intrinsic value of call optionsTHIS IS A
CALL BEAR SPREAD2Calculate the profit of our portfolio
(Bear Spread)3Adjust for contract size
StraddleCallPut PriceInitial S P13.511.5125.94K Price
8. Robinson: Robinson:
Call Strike
K Price
Robinson: Robinson:
Put Strike120120Call ValuePut ValueSTCall ProfitPut
ProfitOverall
Page 1 of 2
FIN4486 – FINANCIAL RISK MANAGEMENT - FINAL
PROJECT
DERIVATIVE STRATEGIES
A manager of a firm will usually deal with two kinds of risk: (i)
Business Risks and (ii) Financial Risks.
Financial risk management deals with the proper assessment and
response to the latter of the two. In
the field of investments, there is an abundance of strategies
allowing an investor to “design” payoff
profiles where losses (and/or gains) are limited. Over the course
of the last weeks, we have learned
several of these strategies.
9. The goal of this project is to combine the theory we have
learned with the practice. Students will
propose 5 different investment strategies and subsequently
compare the expected payoff/profit
diagram with the realized profits or losses. The strategies must
involve derivatives (i.e. Bull (call)
spread, Bear (put) spread, straddle, …)
**You should work in teams comprised by 5-6 students. If your
team includes 6 students, you should
propose 6 different strategies.
A. QUALITATIVE RESEARCH
You should include a qualitative analysis where you describe
the five strategies selected by
the group. For each strategy, please explain:
1. The market setting in which your selected strategy incurs in
gains or losses (i.e. if you
follow a bear spread, do you gain or lose if markets go
up/down… do you gain or lose
if markets move slightly or if there are wide market swings).
2. The holding period of your strategy (i.e. you will form a bull
spread today and you will
close it on Friday next week….. Please note you can buy
derivatives with longer
durations. That is, you can buy a call option that expires one
10. year from now, even
though you are planning to close your position on Friday next
week).
3. Any expected-events or the overall situation of the
underlying stock(s) during the
holding period of your strategy (i.e. WMT is expected to
announce earnings or TSLA
has experienced large price swings recently due to…).
4. Include a brief SWOT Analysis for each underlying firm.
5. The strike price(s), premiums (cost) and expiration of your
options.
*You can repeat the same firm in more than one strategy, but
make sure to choose at
least five firms in total.
*The qualitative analysis must be at least 2 pages (single-spaced
and typed).
B. QUANTITATIVE RESEARCH
• Using the Excel spreadsheet we have used in class, as template
(you can use a different template as
well), please plot the profit diagram for each one of your five
selected strategies. Recall that
to calculate profits you must reduce the option premiums from
your overall payoffs (same as
11. we have done in class).
1. Please include a screenshot of the option chains (list of
prices) showing the actual
option strikes, expiration and premiums (prices) you are
selecting for your project.
2. Please include a screenshot showing the stock price at that
time and the date when
you get this information. This date is the date of “formation” of
your strategies.
3. What are the stock prices that result in your maximum gain
and maximum loss? What
is the maximum profit and maximum loss?
Page 2 of 2
4. Plot profit diagram keeping in mind you can only buy/sell
options in contracts
controlling 100 shares each. Thus, always make this final
adjustment by multiplying
by 100 as learned in class. Please use a different sheet for each
strategy.
*Keep in mind you will be using the real values from real
options (you can get the
12. information from any source. For instance:
https://finance.yahoo.com/quote/TSLA/options/).
5. A sample spreadsheet is attached for your convenience. It is
the same solved during
class and uploaded to the Weekly Module. Notwithstanding:
▪ Please make sure to carefully follow all steps as learned in
class when
preparing the profit charts.
▪ You can directly use this Excel spreadsheet for your project.
However, please
prepare a clean version of these charts removing notes or hints
that were
added during class.
C. CONCLUSION
1. From the qualitative portion of the project, you have already
selected the date in
which you will close your positions. At that date, go online and
get the updated stock
prices for each one of your underlying firms: (a) You only need
the stock prices at
this point (get the screenshot of each stock price) …. You may
also (b) look at the
13. options prices directly as well, but doing so is optional, and
does not substitute step
(a).
2. Assume that you close all your positions. Calculate the
profits/losses you have
attained from each strategy in the same sheet where you had
“forecasted” all the
possible scenarios.
3. Are your gains/losses within the range you had previously
defined?
*Ok, since we are likely dealing with American Options, let’s
allow for early exercise.
If you notice any of your portfolios have a good performance
and you want to close
your positions before the initial closing date you had decided in
A.2 ….. Go ahead! …
However, please follow the same steps as in B.1,2,3 …. The
screenshots of the stock
prices are needed.
https://finance.yahoo.com/quote/TSLA/options/
