HOMEWORK INTERNATIONAL FINANCE (10 points)
Part I (7 points)
State the date of your analysis, your name, and UČO. The recommended length of Homework
is a minimum of 700 words. State all the sources and hand out the report in MS Word and
calculaBons in MS Excel. No PDF, please. Upload the Homework to Handouts in IS by 15th
November 2024. Please support all your statements with relevant arguments.
Go to the website inves-ng.com and download monthly data for EURUSD from 1.1.2000 to 15.10.2024.
· Calculate the percentage price changes over one-month intervals (monthly price returns).
· Draw the histogram of monthly percentage changes in the EUR/USD exchange rate in Excel, where
the horizontal axis describes the monthly percentage changes observed for the EUR/USD rate and the
ver-cal axis describes the percentage frequency of occurrence of the rates of the exchange rate.
· Interpret the shape (symmetricity) of the probability distribu-on and provide the economic
interpreta-on of the probability distribu-on.
· Calculate and interpret the mean and standard devia-on for the probability distribu-on.
Financial managers are also interested in the probability distribu-on of future spot exchange rates.
Given that we observe an exchange rate of s(t) today (15.10.2024) and we have a historical dataset of
monthly returns, we can find the probability distribu-on of future exchange rates in 30 and 180 days.
For the s(t) use the EURUSD market close price on 15.10.2024. The condi*onal mean (the expected
mean at -me t of the future spot exchange rate 15.11. 2024 and 15.4.2025) can be represented by the
market forward prices. As you will calculate the probability distribu-on for the following 30 and 180
days, the condi-onal mean is expected price in 30 days from now (15.10.2024) will be the forward
price on 15.11.2024. For 180-day predic-on use the forward price for 15.4.2025 (.e.g. you make the
analysis on 1st
November, you take a spot price on 1st
November and calculate what would be the
forward price on 15.4.2025 by adding/subtrac-ng swap point of forward instrument of adequate
length to the spot price at 1st
November.). Make the print screen of the website, you take the forward
rates from and state the url of the website. Armed with the condi-onal mean and condi-onal standard
devia-on of the future exchange rates, you can determine the probability that the future exchange
rate will fall within any given range of exchange rates.
· Please calculate how likely it is that the EUR will strengthen over the next 30 and 180 days to at least
an exchange rate of 1.1050.
· Please calculate the price range, where the price of EURUSD might be in 30 (15.11.2024) and 180
(15.4.2025) days with the probability of 95.45%. For both calcula-ons use NORM DIST EXCELL
FUNCTION.
Part II (3 points)
· Compare your calcula-ons with the Refini-v FXVE (FX Vola-lity Explorer Func-on). Click on Spot
Vola-lity. Comment on similari-es/differences with your results.
· Calculate the following scenarios of price and return movement. The scenario se`ngs are the same
as in Part 1.
• Price movement in 1 Month (1M expira-on) and 6 Months (6M expira-on) using 10-year
historical data.
• How likely it is that the EUR will strengthen over the next 30 and 180 days to at least an
exchange rate of 1.1050.
• Calculate the price range, where the price of EURUSD might be in 30 and 180 days with the
probability of 95.45%.
Make a print screen and comment on the results and differences between your calcula-ons in Part I
and calcula-ons provided by Refini-v (FXVE func-on).
· Compare your calcula-ons with FXVE FX Polls. According to professional analysts and economists,
what is the most probable EURUSD price in 1M and 6M? What informa-on are their expecta-ons
based on? (Go to FX polls and read relevant analysis).