Need only Task 2 It is very important Need to write Accurate answer Here Home Currency BDT Taka, Foreign Currency USD FX market is considered as the most perfect market in the world where we can expect to hold the law of one price The law of one price provided a theoretical base for all international parity conditions International parity conditions can be used to understand the operational behavior of the foreign exchange market In a perfect market, all these parity conditions should be held and there will be no possibility of abnormal profit on arbitrage or speculation The aim of this group assignment is to give you an opportunity to empirically investigate the existence of some of those parity conditions This assignment consists of two tasks, as described below Task 1 Factors affecting the foreign exchange market You are required to collect data on historical foreign exchange rate for 5 selected currencies against the Bangladeshi Taka or any particular currency for the period of 01 01 2017 31 12 2019 (two year daily data) Plot the collected data on a graph showing the daily movements in FX rates (you can plot all data in one chart or use several charts, if the magnitude of the rates varies widely) Identify the significant movement of FX rates during the last year of your data and explain possible reasons for those movements (you are required to cite all your sources) Discuss how those foreign exchange movements have affected the economy in general (you can use any other information such as trade statistics to justify your explanations) Estimate the correlation coefficient for each pair of currency Use percentage change in exchange rate to calculate the correlation What can you learn from the estimated correlation coefficients Explain, how you (assuming that you are a financial controller of a large MNC which having cash flows in all currencies) can use the estimated correlation coefficient to manage the foreign exchange rate exposure Task 2 Forecasting foreign exchange rates 1 Select two currencies on which you have already collected data and find corresponding national interest rates and inflation rates information from respective official sources (such as central banks or IMF) 2 Based on the spot exchange rates on January 1, 2020, estimate the expected exchange rate one month, three months, six months and one year using the power purchase parity and International Fischer Effect 3 Compare your estimated spot exchange rates with the corresponding actuals rates Are they different to the actuals Explain why Your findings should be presented as a report All sources of information (such as bank names, text books, websites with addresses, etc) which you used to prepare your report should be cited appropriately (You must attach the FX data tables and other relevant graphs with the soft copy of your report) (Word requirements for the report2,000 (Maximum excluding statistical data)

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[Need only Task 2 - It is very important - Need to write Accurate answer - Here Home Currency: BDT Taka, Foreign Currency: USD] FX

[Need only Task 2 - It is very important - Need to write Accurate answer - Here Home Currency: BDT Taka, Foreign Currency: USD]

FX market is considered as the most perfect market in the world where we can expect to hold the law of one price. The law of one price provided a theoretical base for all international parity conditions. International parity conditions can be used to understand the operational behavior of the foreign exchange market. In a perfect market, all these parity conditions should be held and there will be no possibility of abnormal profit on arbitrage or speculation. The aim of this group assignment is to give you an opportunity to empirically investigate the existence of some of those parity conditions. This assignment consists of two tasks, as described below:

Task 1

Factors affecting the foreign exchange market:

You are required to collect data on historical foreign exchange rate for 5 selected currencies against the Bangladeshi Taka or any particular currency for the period of 01/01/2017 -31/12/2019 (two year: daily data).
Plot the collected data on a graph showing the daily movements in FX rates (you can plot all data in one chart or use several charts, if the magnitude of the rates varies widely).
Identify the significant movement of FX rates during the last year of your data and explain possible reasons for those movements (you are required to cite all your sources).
Discuss how those foreign exchange movements have affected the economy in general (you can use any other information such as trade statistics to justify your explanations).
Estimate the correlation coefficient for each pair of currency. Use percentage change in exchange rate to calculate the correlation What can you learn from the estimated correlation coefficients? Explain, how you (assuming that you are a financial controller of a large MNC which having cash flows in all currencies) can use the estimated correlation coefficient to manage the foreign exchange rate exposure.

Task 2

Forecasting foreign exchange rates

1. Select two currencies on which you have already collected data and find corresponding national interest rates and inflation rates information from respective official sources (such as central banks or IMF).

2. Based on the spot exchange rates on January 1, 2020, estimate the expected exchange rate one month, three months, six months and one year using the power purchase parity and International Fischer Effect.

3. Compare your estimated spot exchange rates with the corresponding actuals rates. Are they different to the actuals? Explain why.

Your findings should be presented as a report. All sources of information (such as bank names, text books, websites with addresses, etc) which you used to prepare your report should be cited appropriately. (You must attach the FX data tables and other relevant graphs with the soft copy of your report). (Word requirements for the report2,000 (Maximum/excluding statistical data)