finance technical assignment

Part 1 of Class Project International Finance Dr. Xavier Garza Gomez

University of Houston-Victoria School of Business FINC 6367 International Finance Dr. Xavier Garza Gómez Spring 2019

Part 1 of the Class Project – Initial data collection This part of the project is worth 1 point. Students in the small groups will work over the weekend of April 5th to collect and process all the information needed for the group projects. They must submit the processed Excel file by the following Monday. Please obtain information after market closes on Friday afternoon (4:00 PM) but before the market opens on Sunday.

Instructions Students will refer to the two videos prepared by instructor to obtain and process the data for their own currency pair. They will use the template provided and fill the “Source data for DC1” sheet with relevant images, URLs and data. Then, students will input the required information in the “DC1” sheet of the Excel template.

These are the items needed for the project:

I. FIRST SET OF DATA

1. Currency to hedge 1a Currency pair formed with the US dollar (as seen in OANDA) 1b Date hedge (trades) will be closed and all the calculations done 1 week after DC1 1c Is this a direct quote in the spot market? (Y/N)

2. Exchange rate of the currency as typically quoted in FX markets Use the Forward quotes and the SPOT price quotes from investing.com

BID ASK

2a Express the price as a direct quote (value of one unit of that currency in dollars) 3. Three or six-month future rate as of this date (use whatever period covers the second data collection period) Report the futures contract settlement price reported on the CME Group website

Expiration month of future contract . Specify the size of the future (option) contracts

4. Forward points observed on this date. Use the Investing.com website for information. Select data for 1W or 2W.

BID ASK

Horizon for Fwd

quotes 1Week (SW) 5. Use the CME group website to obtain call option price data. Specify the expiration month on the CME options that will cover the period you are interested in hedging

Strike Premium 5a. Choose a call option that is in the money and obtain its premium 5b. Find the call option that is at the money and obtain its premium 5c. Choose a call option that is out the money and obtain its premium

Part 1 of Class Project International Finance Dr. Xavier Garza Gomez

6. Use the CME group website to obtain put option price data. Use the same expiration month you chose for call options Strike Premium 6a. Choose a put option that is in the money and obtain its premium 6b. Find the put option that is at the money and obtain its premium 6c. Choose a put option that is out the money and obtain its premium 7. Use the Global Rates website to identify the LIBOR rates LIBOR rates USD rate for the horizon selected Foreign currency rate for the horizon selected

Important:

Distance between ATM and ITM and between ATM and OTM must be at least 100 pips

Remember that ATM (at the money) is the option that has the strike price closest to the FUTURES settlement price. ITM (in the money) is the option that has a positive payoff if it expires right now and OTM (out of the money) is the option that has a zero payoff if it expires right now.

In addition to the information above, students will capture an image of the currency forecast found in FXStreet.com. Please refer to sample data file to obtain the URL.

Processing must be done over the weekend and the deadline for submission is Monday midnight.