If you have any questions regarding the cases, please send them to
ritc@rotman.utoronto.ca. Answers to your questions will be posted on this website periodically under the General Q&A section.
Case File
The cases for the 2009 Rotman International Trading Competition is located
here.
Quantitative Outcry Appendix
RITC 2009 Quantitative Outcry Appendix [xlsx]
BP Canada Commodities Sample Trading Model
RITC 2009 BP Support Sheet [xls]
Rotman Interactive Trader Sample Cases
Starting
February 2nd, you will be able to run the Rotman Interactive Trader platform and connect to the following server/ports to try practice versions of each case:
| Case File | Server | Port |
| Sales & Trader | flserver.rotman.utoronto.ca | 10000 |
| BP Commodities | flserver.rotman.utoronto.ca | 14970 |
| Credit Risk | flserver.rotman.utoronto.ca | 14980 |
When connecting to each server, use any unique login and password, it will prompt you to create a new account and then you can trade.
General Q&A
For the Social and Quantitative Outcry cases, does the close of the open outcry futures trading session correspond with the last day of trading of the index futures contract?
If halfway though some month no credit watch announcement is released, should this be interpreted as a guarantee for no change in the credit rating of the bond or does it simply mean that the probability distribution for the specific bond is still valid so that the bond may be upgraded, downgraded or have the same rating at the end of the month?
Are traders obliged to make two way prices when asked to by another team, or can they simply do so if they feel like it?
Once we know the credit watch is positive, assuming currently BBB, then we know the next rating will be A, AA, AAA. What are the probabilities of transitioning to A, AA, AAA? Is it 50%, 25%, 25%. Is it upgrade probabilities normalized over total probabilities?
Can the Betas change for Quant Outcry? Will the Betas be different at the competition?
We don't understand the probabilities on page 6 for TMT remaining AAA. Where do these numbers come from - 50 + 10 + 15?
The long margin is 50%. $10 bond requires $5. The price of the $10 bond changes, does our margin change. If the bond price falls to $7.5, or if it falls to $5, what happens?
In the Quantitative Outcry case, will the Rotman index change continuously, or will it change once every 5 minutes? The model implies that it will be discrete.
In the Quantitative Outcry case, when the economic indicators are released, are those indicators a mathematical expected value of the indicator, or are they the actual value of the indicator?
In the schedule for RITC 2009, there is no credit case listed, but there is a mystery case. Is the mystery case the credit risk case?
In the case document, in the section about the Outcry case. On page 15, you have 2 formulas where you talk about GDP. There is however no GDP in the excel data, and no GDP in the explained variables. Could you clear that part up or am I missing something?
While trading the credit case, negative watch news appeared for one of the bonds but at the end of the month there was no news confirming the downgrade and how many steps down. Is it possible to have negative or positive watch and then actually nothing happens?
Is the excel file for the gas futures case just an example or is it a file that all teams should use? Is it just an example to build our own models or is it a model for all teams?
In the Trades and Sales case, is there two different sub-cases, one with the 5 stocks (SUB,MORT,etc.) and one with microstructure 2 (with CRZY,TAME stocks that we trade at the platform) or just the case with the 5 stocks only?
To correctly compute the fair value of a bond in the Credit Risk case, aside from knowing the probability of the step sizes (given a watch) we also need to know the probability of a watch being announced (since a company may not be on credit watch at all), and then what the chance of each type of watch (positive, neutral, negative) occurring if there is a watch. Can you provide us with those probabilities?
Is it safe to assume that the weather forecasts (i.e. average, cool, warm) in the gas futures case will follow a similar distribution as the one that can be observed on the current demo server for the case? In other words, will the basic parameters of the game change from the practice server to the competition?
The description said that 12 minutes = 12 months, and that there are 4 heats of 12 minutes each - total trading time of 48 minutes for each pair of partners. Later on, it sounded like each bond had a chance of defaulting every 12 months. It also sounded like each product was a one-year product. So could you just clarify please? What maturity is each product supposed to be? I need this for the risk-free rate calculation.
Will there be a RTD link for the current credit rating and watch status into excel during the credit risk case. Also, in the Quant part of the case it explains that the data for the indicators will come in at the end of each month. Does this mean that time 10, 20,30, ect are the times when data comes out?
Concerning the Credit Risk Case, It is said "Neutral credit watch which means that an upgrade or downgrade will occur". Should it be: "upgrade, downgrade, or no change will occur"?
Answers to asked questions will be posted here.
For the Social and Quantitative Outcry cases, does the close of the open outcry futures trading session correspond with the last day of trading of the index futures contract?
Yes, so whatever the last price is during the trading session, is the value that all remaining positions will be closed out at. Rationally, the market should converge to the spot market throughout the case and intersect at the end.
If halfway though some month no credit watch announcement is released, should this be interpreted as a guarantee for no change in the credit rating of the bond or does it simply mean that the probability distribution for the specific bond is still valid so that the bond may be upgraded, downgraded or have the same rating at the end of the month?
It means there will be no credit change in the immediately preceding announcement period.
Are traders obliged to make two way prices when asked to by another team, or can they simply do so if they feel like it?
Traders are not obligated to make two-way prices. They can choose to post(announce) bids and/or asks, or remain silent and simply trade with (hit) other people’s quotes.
Once we know the credit watch is positive, assuming currently BBB, then we know the next rating will be A, AA, AAA. What are the probabilities of transitioning to A, AA, AAA? Is it 50%, 25%, 25%. Is it upgrade probabilities normalized over total probabilities?
You can cut off probability of a downgrade/neutral, and reweight the possible outcomes.
Can the Betas change for Quant Outcry? Will the Betas be different at the competition?
The beta cannot change during the quant outcry event. They were initialized and used to generate the data-appendix, and the same betas will be used to generate the actual competition case realization.
We don't understand the probabilities on page 6 for TMT remaining AAA. Where do these numbers come from - 50 + 10 + 15?
There is a typo in the case file, here is the [edit]
A bond’s rating can go no higher than AAA and no lower than CCC. For example, if at the end of Month 4,
TMT is rated AAA, the probability that its credit rating will remain at AAA at the end of Month 5 will be equal to
[80%] ([60% + 10% + 5% + 5%] we add up the probabilities of the bond’s rating not changing plus the bond’s rating
increasing). However, if TMT’s credit rating is equal to B at the end of Month 4, the probability that its credit
rating will fall to CCC at the end of Month 5 will be equal to [20%] ([10% + 5% +5%], the credit rating must fall by at
least 1).
The long margin is 50%. $10 bond requires $5. The price of the $10 bond changes, does our margin change. If the bond price falls to $7.5, or if it falls to $5, what happens?
The long margin is 50%. $10 bond requires $5. The price of the $10 bond changes, does our margin change. If the bond price falls to $7.5, or if it falls to $5, what happens?
The margin does change. Margin is calculated based on a “buying power” basis, and as the value of your portfolio increases/decreases, your buying power increases/decreases accordingly. If you buy a $10 bond and the value falls to $5, you have lost $5 of equity, and you’re still required to post $2.50 of margin for the $5 bond.
Buying power looks like this
$10 cash, $10 buying power, $10 account equity(NLV)
Purchase bond for $10
$0 cash, $10 bond, $10 account equity(NLV), $5 buying power (you are able to borrow up to 50% of the bond’s value)
Bond is now valued at $5
$0 cash, $5 bond, $5 account equity(NLV) $2.50 buying power
Bond is now valued at $20.00
$0 cash, $20 bond, $20 account equity(NLV) $10.00 buying power
Originally, the margin settings in the package credit case were incosistent with the case document. They have since been changed.
In the Quantitative Outcry case, will the Rotman index change continuously, or will it change once every 5 minutes? The model implies that it will be discrete.
The index that you are trading updates continuously.
In the Quantitative Outcry case, when the economic indicators are released, are those indicators a mathematical expected value of the indicator, or are they the actual value of the indicator?
Both expected values for future indicators, and actual indicator values are released. i.e. In on Feb 1st, you will be given January’s realized values, and forecasts for indicator Y, X months out.
In the schedule for RITC 2009, there is no credit case listed, but there is a mystery case. Is the mystery case the credit risk case?
Yes.
In the case document, in the section about the Outcry case. On page 15, you have 2 formulas where you talk about GDP. There is however no GDP in the excel data, and no GDP in the explained variables. Could you clear that part up or am I missing something?
GDP itself has no affect on the Rotman Index. We are explaining the process used to generate the data for the indicators and the index. You can interpret it in any way you wish.
While trading the credit case, negative watch news appeared for one of the bonds but at the end of the month there was no news confirming the downgrade and how many steps down. Is it possible to have negative or positive watch and then actually nothing happens?
This is an oversight when we made the practice version of the case, that one situation has been taken out (Month 1 credit watch for CSM – CSM has no change at the end of Month 1)
Is the excel file for the gas futures case just an example or is it a file that all teams should use? Is it just an example to build our own models or is it a model for all teams?
It is an example, it is strongly suggested that you build your own model.
In the Trades and Sales case, is there two different sub-cases, one with the 5 stocks (SUB,MORT,etc.) and one with microstructure 2 (with CRZY,TAME stocks that we trade at the platform) or just the case with the 5 stocks only?
There are 5 sub-cases, each one with a different number of different stocks.
To correctly compute the fair value of a bond in the Credit Risk case, aside from knowing the probability of the step sizes (given a watch) we also need to know the probability of a watch being announced (since a company may not be on credit watch at all), and then what the chance of each type of watch (positive, neutral, negative) occurring if there is a watch. Can you provide us with those probabilities?
Whether a change next period happens or not is drawn first, if there is a change, a watch is issued (the probability of the watch being positive, neutral or negative is not given- nor required for modeling), if there is no change, no watch is issued.
Is it safe to assume that the weather forecasts (i.e. average, cool, warm) in the gas futures case will follow a similar distribution as the one that can be observed on the current demo server for the case? In other words, will the basic parameters of the game change from the practice server to the competition?
Yes, the basic parameters (weather model) is the same in the practice case as it will be in the real thing.
The description said that 12 minutes = 12 months, and that there are 4 heats of 12 minutes each - total trading time of 48 minutes for each pair of partners. Later on, it sounded like each bond had a chance of defaulting every 12 months. It also sounded like each product was a one-year product. So could you just clarify please? What maturity is each product supposed to be? I need this for the risk-free rate calculation.
Each sub-heat is a separate run of the Credit Case and simulates 12 months of trading (60 seconds per month for a total of 12 minutes). The outcome of each sub-heat are independent of one another. Bonds only default at the very end based on their final rating. In the meantime, the rating may increase or decrease based on the probability table provided in the case file. A bond's rating at the beginning of Month 12 is then used to determine the probability the bond will default at the end of Month 12 (the end of the case) based on the table within the case file. Therefore, the bond FIN will not default between Month 1~11 but its rating may change. Assuming that FIN has a rating of BBB at the beginning of Month 12, it will have a 15% chance of defaulting at the end of the case.
Will there be a RTD link for the current credit rating and watch status into excel during the credit risk case. Also, in the Quant part of the case it explains that the data for the indicators will come in at the end of each month. Does this mean that time 10, 20,30, ect are the times when data comes out?
There is no RTD link for the current credit rating and must be manually inputted into your model. In the quant case, monthly data will arrive every 5 minutes with other updates occurring randomly throughout.
Concerning the Credit Risk Case, It is said "Neutral credit watch which means that an upgrade or downgrade will occur". Should it be: "upgrade, downgrade, or no change will occur"?
Neutral credit watches signal that the bond's rating will change at the end of the month, however it may go up or down – it will not stay the same.
