Workplace reviews and discussion: 富邦綜合證券股份有限公司

It happens every day without fail! The results from the previous batch of experiments still aren’t out, and the daily CD deliveries have turned my hair gray. Every day I try to find people, but I can’t find anyone. Only this problem seems to be meaningful.

“Year-End Settlement Intertemporal Economic Net Utility Extremum Assessment Including Cookie Consumption”

In conducting the year-end settlement in 2024, an investor used the following criteria as the evaluation standard:

Year-end settlement objective function =

Financial book profit and loss

Foreign exchange effects

− Present-value expenditures for life events

− Monetary equivalent of utility losses

± Marginal utility adjustment for cookie consumption

I. Financial Positions (Full Calculation Required)

(1) Futures

The investor holds 2 long Taiwan Index Futures contracts

Contract multiplier: 200

Entry index: 15,750

Year-end settlement index: 16,180

Margin as a percentage of notional value: 12%

Annualized funding cost: 3.5%

The opportunity cost of margin is calculated using continuous compounding

(2) Warrants (Underlying Asset Without Dividends)

European call warrant

Current underlying price: 102

Strike price: 100

Time to expiration: 1 year

No dividends

Risk-free interest rate: 2% (continuously compounded)

Volatility: 28%

Recognized at year-end using the Black–Scholes theoretical value

The number of warrants is allocated so that Delta is not 0 (non-Delta-neutral)

(3) Currency Position

At the beginning of the year, 120,000 USD was exchanged at 29.8 TWD/USD

Year-end exchange rate: 31.4

No interest accrued during the year

Foreign exchange gains and losses must be adjusted for an inflation rate of 1.5%

II. Life Events (Included in the Year-End Settlement After Discounting)

(1) Marriage

Married mid-year

One-time expenditure: 1,350,000 TWD

Psychological discount rate: 3%

(2) Having a Child

Child born at year-end

Expected expenditure period: 22 years

Annual real expenditure: 320,000 TWD

Expenditure growth rate: 1%

Discount rate: 2%

(3) Loss of Life Utility

Caused by investment and work-related stress

Sleep deprivation: utility loss equivalent to 90,000 TWD

Reduced frequency of going to the movies: utility loss of 45,000 TWD

Reduced frequency of eating at all-you-can-eat restaurants: utility loss of 35,000 TWD

III. Cookies (Core Difficulty)

The investor consumed a total of 480 cookies during the year

Price per cookie: 35 TWD

Cookies are a form of immediate-pleasure consumption

The marginal utility function of cookies is:

Marginal utility = 1200 / square root of n

where n is the cumulative number of cookies consumed

When the marginal utility is less than 35, that portion of consumption is considered overconsumption

The utility corresponding to overconsumption must be included

The utility loss is multiplied by a penalty coefficient of 0.6 as a year-end settlement adjustment item

IV. Question

After fully incorporating all financial gains and losses, foreign exchange adjustments, the present value of life events, utility losses, and the marginal utility adjustment for cookie consumption, which of the following is closest to the investor’s “adjusted net economic effect after the 2024 year-end settlement”?

Options (only one is correct)

A. Positive 2,800,000 TWD

Financial operations were highly successful, and cookie consumption remained within the rational consumption range

B. Positive 1,050,000 TWD

Financial gains were significant, but having a child and cookie consumption substantially eroded the results

C. Negative 650,000 TWD

There was a book profit, but the year-end settlement resulted in a substantial real loss

D. Negative 2,300,000 TWD

Highly leveraged financial operations, long-term life expenditures, and excessive cookie consumption caused the overall economic situation to deteriorate