FNCE90016 International Financial Management - Group Assignment

Part II. Exchange Rates during Brexit

Question 1

The original data is sourced from Bank of England. It includes daily data in 2016 (Jan 4 – Dec 30) covering UK Official Bank Rate (1 month), Spot and 1-month forward USD/GBP rates, and spot EUR/GBP rate. Find the daily change in spot $/£ rate: ΔSt+1=St+1 – St and the rate of change: et+1 = ΔSt+1/St. Plot the two series, ΔS and e. Report the mean, standard deviation, max and min of ΔS and e. Which one do we usually use when studying exchange rate movements and why? Also find out the dates for the max, min. (15 marks)