Stage 2: The Forex Report
Weight: 20%
Assignment due date: Friday 4th October
Length (indicative): 2500 words
Feedback mode: Feedback will be provided by the dealing room tutor on canvas.
Task: Submit a group report explaining your group market view and presenting an analysis of your group dealing sessions.
The following structure and guidelines are provided to assist you in writing your group report.
Executive summary or synopsis
Your report must include an executive summary.
An executive summary essentially summarises the entire report. Note that a simple Google search of “RMIT Executive Summary” yields the following result:
We advise you to read through this if you do not know what is expected for an executive summary. The best way to understand an executive summary is the following: Your senior manager is a very busy person and will most likely not have the time to read through the report, hence an executive summary is a way to communicate the entire report as an “overall” picture. Please note that the executive summary counts towards the word count for the report.
The answer to the following questions will make a decent Introduction:
• What is the name of your organisation?
• Are you a bank or a corporation?
• What are your objectives – both primary and secondary?
• How do you plan to achieve your objectives at the beginning of the dealing session?
• What factors do you and your group need to take into account in trying to achieve your objectives?
Market View
You must have a market view prior to the commencement of your second trading session as you will be trading according to your view as a group during that session.
The market view and your strategy (based on that view) are critically important components of the report. You will not get a passing grade on the report without these components.
You are required to provide your Market View report as a group based on your three individual market views submitted previously. You must choose one of the three individual market views, and use this to trade in the second dealing session. This will form part of your final report.
In your group market view, you should provide some prediction on one currency pair you have analysed for the next three months. These currency pairs should be linked to the speculation strategy. You will have to state whether the foreign exchange rates value will appreciate or depreciate in terms of the other currency. Do not simply quote other people’s opinions. You should present your opinion, and explain in your own words why you hold that opinion in a way that shows that you understand the theories behind the determination of the exchange rates (topic 2 and 4B). You can certainly quote evidence that supports your opinion, and this evidence must be correctly referenced (do not submit copies of your collected articles with your report). For your view, you should use at least five references.
For the final report, please review your market view Task 1 Report again and write a summary of your market view, focusing on the currency pair you used for speculation purposes. Do ensure that you incorporate the feedback received from your trading instructors about your market views. It is critical to understand that the market views are linked to the rest of the report, therefore having sub-par market views will result in the rest of the report also being subpar.
Trading strategy
In your Dealing room sessions, you will be assigned certain objectives.
• Firstly, explain how you intend to achieve your primary objective. It is possible that you may have devised some tools or engines that helped you to get an idea of when to square so if you have, please discuss it! It is definitely encouraged and unique strategies are rewarded if explained properly. Anything that you feel may have helped you prepare for your dealing session should be discussed here. Note that if you’re a corporation you will probably have a scenario that involves you to trade currencies that are not a part of your market view; this is expected. If you’re a bank you’ll need to devise an appropriate trading strategy as you will be most likely dealing with all 5 currencies.
• Secondly, look at your secondary objective and give your view about current and future market conditions (based on your market view), devise a strategy that you will try to implement during the dealing session. This strategy will specify how you will go about achieving your secondary objectives in a way that benefits your organization – which currencies you will buy or sell. Alternatively put, for the secondary task, you need to devise a trading strategy that directly involves what your market view was. For example, if you predict that in the next 3-6 months that the AUD will depreciate against the USD, how would you set up a trading strategy to take advantage of this depreciation? Where appropriate, you should also devise a speculation strategy which will allow you to create a portfolio of currencies to enable your organization to take advantage of your predicted changes in the exchange rates.
Performance analysis
The market views and trading strategy combined were your plan “expectation” for the dealing simulation. Now, you will write about what actually happened in the dealing session. The performance analysis is about comparing the real outcomes with your initial expectations.
• Discuss what actually happened during the dealing session. Were you able to use your strategy? Why or why not? Did you achieve your objectives? Why, or why not? Justify.
• Use the output from your accounts section to discuss your performances: what are your final positions, realised profit or losses, average rates, Ultimately, to what extent have you been able to complete your tasks (primary and secondary)? Report how your profit or loss was made. To clarify, your profit or loss can be made in two different ways: 1. It is made by negotiating market rates such that you buy low, sell high. 2. The profit/loss calculation in the trading system uses the mid-market rate supplied by Eikon to calculate your opening balance in the AUD, and your net closing balance in the AUD. You would be required to carefully study your trading reports in order to determine whether the profit figure comes from (1), (2), or both. In addition to that, a good idea would be to refer to (a group of) trades that could have really put your group in a good position. For example, “Trades 15-21 and 24 is where we got a really good deal and managed to raise the JPY for the lowest cost possible, therefore contributing to our minimal losses incurred”. Making specific reference to your trades is recommended.
• Do you feel that you have set up your organisation to take advantage of movements in exchange rates, if they move as you have predicted? Why or why not? (This is more important than making a profit ). This requires you to compare what your trading strategies were, against the movement of the spot rates during the three hours dealing session. You should justify why your trading strategies worked or failed. For example, at the end of the FX session, did you finish up being long or short of AUD, rather than maintaining a square position as desired?
• Can you identify any transactions where you have bought and sold the same currency and made a profit or a loss? If you were buying a currency, how far were you off your benchmark? How do the rates obtained compare to the rate/prices for the day?
• If you are a corporate, you are unlikely to make a profit for your primary objective over the course of the session. There will be profit only if you have bought and sold the same currency at favourable rates. It is important to comment on whether you have set up your organisation so that it will be able to take advantage of future movements in the rates (minimise cost).
• Looking at your trade corresponding to your secondary objective you should explain which currencies you have bought and sold expecting to make a profit in the next few months based on your market.
• Justify your actions and your final positions to your senior manager. If you made an error during the session, explain what occurred and what you have learned from it.
• Analyse the session in terms of how you performed. How did you divide your responsibilities? Outline what you learned from the session. How could you improve in future sessions?
The idea of the performance analysis is to fully justify your final positions to your senior manager. It is okay to make mistakes, and you will not be penalised, for example, if you don’t achieve a profit in the secondary objective. What we are looking for is for you to be able to fully justify your final positions and to explain any errors that you may have made in the dealing session, and why you made them, rather than analyse you directly on performance (profit). The only time we consider your performance in the dealing session is if we notice that you have made extremely few trades (to quantify, this would be 10 trades or less).
• A conclusion is essential to answer the introduction. Failure to present a conclusion will result in a loss of marks.
Appendices are useful to add additional things that may not be useful elsewhere.
• Your appendices should include all your dealing reports. Label appendices clearly and refer to them in the body of the report. Ensure that you include cents in your accounts as every cent must be accounted for.
• In this report, attach your trading reports that you saved at the end of the session. You MUST include the reports as they are basically your proof for all positions concerned. Failure to do this will result in a major loss of marks. Note that you should not include diagrams or graphs in the appendix, these should go in the main body of your report.
Reference List
• Failure to provide a reference list will also result in loss of marks. The format of your reference list should follow the Harvard referencing style. Ensure you do your references properly.
Report presentation and format
• Your final report should be presented as a business report. It should be clear and concise. Include all relevant information, but only relevant information.
• You are the treasury group. You are free to make any decisions that you believe will benefit your firm. However, you must be able to explain and justify your actions and convince your Senior Manager that you did a good job.
• While participating in the treasury dealing simulations you will be expected to follow appropriate trading etiquette and standards of behaviour. These will be outlined to you during the trading practice sessions. Failure to comply with these requirements will result in a 1 or 2 mark penalty against your written report mark.
Formatting is important. Reports are to be well written following the recommendations of the RMIT Learning Lab on (Links to an external site.)reports writing. (Links to an external site.)
There is also material on the web site: (Links to an external site.)
• The report should not exceed 2,500 words (with a 10% leeway). This excludes the table of content and reference list. The document should be formatted following the guideline below and the RMIT presentation guidelines:
o Text should be justified
o 1.5 line spacing
o Character size 12 points font, Times New Roman, 1” margins.
• References should be presented using the Harvard (author-date) referencing A copy of the referencing and presentation guidelines is available at (Links to an external site.)
This is a group assignment and both copying and plagiarism will be heavily penalized.
Submitting the report
This report should be submitted online via canvas. Only one report per group should be submitted.
To check who your dealing room instructor is, please go the Teaching Team page in the “Welcome to Financial Markets” Module.
Marking guide/ Rubric
The assessment criteria for both stages are presented in the submission drop boxes.