MGMT-6075 Individual Project

1
MGMT-6075 Individual Project
Requirements:
• Access and download historical exchange rates for two non-overlapping time periods
• Convert downloaded exchange rates into returns
• Summarize in a tabular form the moments
• Analyze and interpret and submit your analysis
Bid-Ask Spreads in the Forex Market
• Bid price is what the dealer is willing to pay for a currency
o For you as a seller, this is your sale price in FX
• Ask price is the rate at which a dealer will sell the same currency
o For you as a buyer, this is your purchase price in FX
Please Note: The FX rates are quoted as X/Y where Y is the base rate currency and so
X/Y implies # units of currency X per 1 unit of base currency Y
For Example: 1.20 CDN/USD implies 1.20 CDN$ per 1US$
For instance, if yesterday you bought 1.20 CDN$/1US$ (Ask price) by selling your 1US$, and sold it today at 1.25
CDN$/1US$ (Bid price), this shows that the CDN dollar has depreciated and you would be selling 0.05 CDN$ more
to recover your 1US$ invested yesterday
Using the above argument, convert the downloaded data with bid and ask prices to returns.
Please Note: If you bought yesterday at the bid-price and sold today at the ask price, you will need to compute
returns w.r.t base currency say US$. Save your formula in a separate column against the bid and ask rates to
compute the returns.
Steps to follow:
Go to the following website for historical FX data on select currencies:
http://www.histdata.com
Select Download Free Forex Data from the Menu
Download Free Forex Data – HistData.com
There are various format options to choose namely: Generic ASCII as well as Microsoft Excel
You are offered a range of FX options w.r.t base currency for instance EUR/USD will be #Euros/1 US$
Do remember: The Bid and Ask prices are only included in the Tick data of the Generic ASCII format.
Here are the fields order of the data:
DateTime,Bid,Ask,Volume
For specific details:
Data Files: Detailed Specification – HistData.com
For Generic ASCII in Ticks Format :
Data Row Fields are: DateTime Stamp,Bid Quote,Ask Quote,Volume
2
For Microsoft Excel in M1 Bars Format:
Data Row Fields are : DateTime Stamp;Bar OPEN Bid Quote;Bar HIGH Bid Quote;Bar LOW Bid Quote;Bar CLOSE
Bid Quote;Volume
After compiling the FX returns, summarize your findings in a tabular form for the following higher
moments:
1) First Moment: Average (Mean) value of the stock returns
2) Second Moment about the mean: Variance of the stock returns
3) Standard Deviation of the stock returns: Square root of variance
4) Third Moment about the mean: Skewness of stock returns
5) Fourth Moment about the mean: Kurtosis of stock returns
Compute the above using built-in formulae in Excel (use sample formulae not population).
You may recall from introductory statistics regarding skewness and kurtosis.
Skewness and Kurtosis
Normality Testing – Skewness and Kurtosis
Skewness (Use built in formula in Excel) “=SKEW(…..)”
Kurtosis (Use built in formula in Excel) “=KURT( …)”
Submit your tabular higher moments and analysis (please do not include raw FX data or returns in your submission)