# Essays on International Finance Assignment

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Trading SimulationIntroductionThis paper deals with the trading relevant and regarding to the portfolio of a value of \$2, 50,000. There exists a restriction regarding the markets. The trading in the markets Euro/US\$, British/Pound/US\$, Japanese Yen/US\$ only should be examined and observed by the simulation of trading with the available notionally. 2. Trading on EuroThe available \$2, 50,000 were invested in future trading of Euro, Yen and Pounds. The \$1, 00,000 were invested in Euro, \$1, 00,000 were invested in Yen and \$50,000 were invested on Pound. By 21st march the position is that the dollar declined against Euro and the drop began at 5am European time and continued till afternoon of 21st march.

1 Euro = 1.3201 dollars by 21st march. This resulted in a profit of \$9,000, as the value of dollar on 5th march is 1 Euro = \$1.23. In the course of two weeks of the investment, there is no loss regarding the investment in Euro. date tradecurrencycontracts maturity price5/3/200725,000USDfuture12/3/200716/3/200750,000USDfuture17-3-0717/3/200725,000USDfuture18-3-071100,000 1. The percentage rate of return over trading period is 9,000x100/1,00,000 = 9. 2. The trading was done for 15 days.

Over the course of 15 days it was observed that there is a change of 9 percent. The average change per day is 9/15 = 0.63. The standard deviations of the change of percentages in the 15 days of the trade. 1st day =13 percent2nd day= 12 percent3rd day = 12 percent4th day = 12 percent5th day = 6 percent6th day = 7 percent7th day = 8 percent8th day = 9 percent9th day = 8 percent10th day = 7 percent11th day = 7 percent12th day = 8 percent13th day = 9 percent14th day = 9 percent15th day = 8 percentSum of the percentages = 13+12+ 12+12+6+7+8+9+8+7+7+8+9+9+8 = 135 /15 = 9The mean of the percentages of change = 9 The standard deviation = (9-13)2+(9-12)2+ (9-12)2+(9-12)2+(9-6)2+(9-7)2+(9-8)2+(9-9)2+(9-8)2+(9-7)2+(9-7)2+(9-8)2+(9-9)2+(9-9)2+(9-8)2 = 16+9+9+9+9+4+1+0+1+4+4+1+0+0+1 = 68/15 = 4.53In the course of 15 days using \$ 1,00,000 invested on euros no future position has been closed.

The cash is not invested in other money markets or investments as there is no chance observed for depreciating of Euro against dollar. All the fifteen days the futures were traded according to the present market price and almost all the times, the dollar depreciated over Euro.

This situation did not compel the trader to invest the portfolio allotted to the euros to be invested in other money markets or investments. At the time of calculating the profit and standard deviation all the future positions were closed. The future positions of the contractsOn 5th March, future contract for the buying euros at \$1 for 1 euro. On 6th March future contract for buying euros at \$1 for 1 euro on 7th of MarchOn 7th March future contract for buying euros at \$1 for 1 euro on 8th of March. On 8th March future contract for buying euros at \$1 for 1 euro on 12th MarchOn 9th March future contract for buying euros at \$1 for 1 euro on 21st MarchOn 10th March future contract for buying euros at \$1 for 1 euro on 21st MarchOn 11th of ““““““On 12th of‘‘‘‘On 13th of ‘‘‘‘‘On 14th of ‘‘‘On 15th of‘‘‘‘On 16th march ‘‘‘On 17th of march‘‘‘On 18th of march‘‘‘On 19th of march‘’‘‘Trading on YenOut of the available \$2,50,000 funds \$1,00,000 were invested in future trading of Japanese Yen.

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