On Thursday, June 23, 2016, electorate in the United Kingdom and Gibraltar voted in the referendum on whether to Remain or Leave the European Union. Voting started at 0700 BST and finished at 2200 BST. The final result was announced at 0720 BST, June 24, 2016. We will take a look at the exchange rate movements during this period. Sheet Part IIIA includes daily data in 2016 (Jan 1 Dec 30) covering the spot, overnight (ON) and one-week forward rates for GBP-USD pair. Sheet Part IIB includes the daily LIBOR rates for GBP and USD in per annum terms (the day count per year for GBP and USD are 365 and 360 days respectively).

1. We are interested in the two-week period from Monday, June 20 to Friday, July 1. This is the period of turmoil in the market. Our task here is to check if the CIRP holds. Calculate ON forward rates from the spot rates and two interest rates. Compare it with the market forward rates by calculating the differences. Describe the steps and the formula you used in your calculation, starting with the given data. Report the resulting differences over the two-week period, its mean and standard deviation. (10 marks)

20/06/2016	0,4825	0,3901
21/06/2016	0,4825	0,3901
22/06/2016	0,4825	0,3896
23/06/2016	0,48375	0,3911
24/06/2016	0,48	0,3934
27/06/2016	0,47875	0,4001
28/06/2016	0,47875	0,4016
29/06/2016	0,47875	0,4051
30/06/2016	0,4775	0,4116
01/07/2016	0,47875	0,4061