The case examines a possible new hypothesis by which a portfolio manager has a 3-asset portfolio which is re-balanced at the discretion of the Portfolio Manager. Other than that the portfolio will be left as it is but for certain value-added strategies with Derivatives. The latter is expected to create additional value for the portfolio. The key decision issue in the case is to ascertain a risk-assessment technique to know the maximum losses that might be incurred in the portfolio over a 15-day no-activity period. This no-activity period is when the portfolio managers have all been asked to attend a training session and will therefore not be required to meddle with their portfolios. In fact, they have been specifically instructed not to do so.
1. To understand the strategic differences between a passive and active stock portfolio
2. To review re-balancing techniques and their implications
3. To review value-added Derivative strategies for enhancing portfolio value
4. To understand Value at Risk Techniques