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Date Europe United States 1/31/2006 1.388309 1.1433 2/28/2006 1.356721 1.13795 3/31/2006 1.411759 1.1666 4/28/2006 1.411494 1.12055 5/31/2006 1.414121 1.10095 6/30/2006 1.421986 1.1121 Currency Forward Prices:
Date | Europe | United States |
1/31/2006 | 1.388309 | 1.1433 |
2/28/2006 | 1.356721 | 1.13795 |
3/31/2006 | 1.411759 | 1.1666 |
4/28/2006 | 1.411494 | 1.12055 |
5/31/2006 | 1.414121 | 1.10095 |
6/30/2006 | 1.421986 | 1.1121 |
Currency Forward Prices:
Date | Europe | United States |
1/31/2006 | 1.389552 | 1.142395 |
2/28/2006 | 1.358176 | 1.137115 |
3/31/2006 | 1.413104 | 1.165605 |
4/28/2006 | 1.413398 | 1.119625 |
5/31/2006 | 1.415797 | 1.100075 |
6/30/2006 | 1.423785 | 1.11103 |
7/31/2006 | 1.444172 | 1.129155 |
Table to be completed with a plotted graph explained by a two line caption:
=rs - hrs-her2 where h and h2 are hedge ratios. The covariance matrix of returns, V, is 3 x 3 The data are in the files Currency Spot Prices and Currency Forward Prices. Without Portfolio Ef- fects in the results table refers to individual hedge ratios estimated as a With Portfolio Efects refers to hedge ratios estimated as V7Vf. For Static hedging, estimate the hedge ratios once and apply them to each month of your hedging period. For Dynamic hedging, estimate the hedge ratios using a moving estimation window as shown in the diagram but using the number of months as- signed to you in the parameter table. Replace realNumber in the file Results Table with your values V = -ON where V.) = (012) is the 1 x 2 vector of covariances between the returns on the spot portfo- lio and each forward contract, and Vy is the 2 x 2 covariance matrix for the forward contracts. Francesca is one smart cookie. PAGE 3 OF 7 h = h2 = (%) = 'v, Dynamic Hedge Ratio Estimation Hedging Period 3 4 2 70 Estimation Window with at least eight significant digits. The unhedged results will be the same for both the Static and Dynamic approaches, Report population standard deviations. 1 2 59 60 Estimation Window 2 59 60 You know there has to be a graph as part of the assignment. Plot the unhedged return on your portfolio, the dynamically-hedged return without portfolio effects, and the dynamically- hedged return with portfolio effects, all in one graph. You'll want to frame this one. Don't forget a caption of no more than two sentences. Estimation Window and so on 1 2 59 60 Complete the Table below using this data in 8 significant figures Estimation window : 50 Start Hedging: Jan 2006 End Hedging: Jan 2013 Currency 1: Euros Currency 2: US Dollars Currency Spot Prices =rs - hrs-her2 where h and h2 are hedge ratios. The covariance matrix of returns, V, is 3 x 3 The data are in the files Currency Spot Prices and Currency Forward Prices. Without Portfolio Ef- fects in the results table refers to individual hedge ratios estimated as a With Portfolio Efects refers to hedge ratios estimated as V7Vf. For Static hedging, estimate the hedge ratios once and apply them to each month of your hedging period. For Dynamic hedging, estimate the hedge ratios using a moving estimation window as shown in the diagram but using the number of months as- signed to you in the parameter table. Replace realNumber in the file Results Table with your values V = -ON where V.) = (012) is the 1 x 2 vector of covariances between the returns on the spot portfo- lio and each forward contract, and Vy is the 2 x 2 covariance matrix for the forward contracts. Francesca is one smart cookie. PAGE 3 OF 7 h = h2 = (%) = 'v, Dynamic Hedge Ratio Estimation Hedging Period 3 4 2 70 Estimation Window with at least eight significant digits. The unhedged results will be the same for both the Static and Dynamic approaches, Report population standard deviations. 1 2 59 60 Estimation Window 2 59 60 You know there has to be a graph as part of the assignment. Plot the unhedged return on your portfolio, the dynamically-hedged return without portfolio effects, and the dynamically- hedged return with portfolio effects, all in one graph. You'll want to frame this one. Don't forget a caption of no more than two sentences. Estimation Window and so on 1 2 59 60 Complete the Table below using this data in 8 significant figures Estimation window : 50 Start Hedging: Jan 2006 End Hedging: Jan 2013 Currency 1: Euros Currency 2: US Dollars Currency Spot PricesStep by Step Solution
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