代做FINM7406 S1 2024 Assignment代做Java程序

FINM7406 Semester 1 2024

Assignment Overview

This is an individual assignment total of 30 marks counting towards 30% of your final grade.

Assignment due: 9 May 2024 13:00. Submit electronically on Blackboard and Turnitin.

Covered Interest Rate Parity (30 marks)

You are required to investigate whether you can capture an arbitrage opportunity that could arise from the violation in Covered Interest Rate Parity (CIP) in USD, EUR, and AUD currency markets. To do so, you need to detect whether such violation in the markets ever happened using daily historical data (interest rates, forward rates, spot rates) from January 2001 to December 2023.

Download the data “data.xlsx” from the Assignment Folder.

For each currency pair i.e. USDAUD and USDEUR, complete Task A and Task B:

A.  Using daily mid rates, calculate the daily deviations from the CIP. Plot the deviations overtime for the entire sample. Report the mean and standard deviation of the deviations for each of the two subperiods: January 2001 - December 2007 and January 2008-December 2023. (10 marks)

B.  Is there any severe violation of the CIP? If there is, choose the day when the largest deviation occurred and construct a trading strategy to capture the opportunity. The trading strategy should be constructed realistically i.e. bid-ask rates should be considered here. How much profit would you have made? Assume that you first start the position by borrowing 10,000,000 units of a currency (USD, AUD or EUR).                     (5 marks)

Provide awritten report to answer the following Task C:

C.  Discuss the potential reasons driving the CIP violation. The report should demonstrate your critical  assessment  whether there  were  in  fact  profitable  arbitrage  opportunities  from  the violation? Hint: Look at the time-series plot of the deviation and think about when the CIP violation tends to happen and why that is the case. Your critical discussion should be supported by evidence from Parts A and B above, as well as academic and/or industry research.   (15 marks)

Submission Info:

Submission:

•    Submit one Excel file on Blackboard containing answers for:

a.   Part A and Part B (calculations only)

b.   Name the Excel file “FINM7406__Lastname_Studentnumber.xlsx” where Lastname is your lastname, Studentnumber is your student number.

c.   You may submit the Excel file as many as you like, but only your last submission will be graded.

•    Submit one written report on Turnitin and Blackboard containing answers for:

a.   Part B  (approx. 500 words). Your answer should contain the explanation of the calculations in the Excel file.

b.   Part C (approx. 2000 words). Your  answer should demonstrate literature review on covered interest rate parity as well as your interpretation of the answers in Part A and Part B. It should also demonstrate your understanding and critical evaluation of the literature. The references in Topic 3 Parity lecture folder are helpful here.

c.   Name  the  PDF  file “FINM7406_Lastname_Studentnumber.pdf” where  Lastname is your lastname, Studentnumber is your student number.

d.   Only submit the written report once on Turnitin.

Notes:

•    Excel: Your Excel file should include all workings and calculations. Formulas for the calculations should have cell references wherever possible. If you have computed a number incorrectly and just  typed  that  number into the spreadsheet (or typed a formula  using  numbers  when  cell references could have been used), you will not receive partial credit for any portion of your computation that is correct.

•    A written report (maximum 2500 words) in a pdf document is required for Turnitin check.

•    References should be in Harvard style. References should come from high quality sources e.g. academic journals, industry reports, World Bank, IMF, etc.