Exploring International Finance using Real Time Data from Bloomberg

Transcription

1 Exploring International Finance using Real Time Data from Bloomberg Richard Holowczak, PhD Paul H. Chook Department of Information Systems and Statistics Zicklin School of Business Baruch College, CUNY 2017 R. Holowczak 1

2 About Baruch College / Zicklin School of Business Founded as the Free Academy in 1847 City College School of Business in 1919 Baruch School of Business in 1953 Baruch College, CUNY in 1968 Today: 18,000 Students 13,500 study in the Zicklin School of Business Photo credit: Denis Gostev 2017 R. Holowczak 2

3 Wasserman Trading Floor / Subotnick Center Opened in ,200 Sq. Ft. space: Trading Floor, Seminar Room, Development Classroom and Research Lab Photo Credit: Mathieu Asselin Upgraded in 2016: R. Holowczak 3

4 My naive view of finance Trading Investments Corporate Finance 2017 R. Holowczak 4

5 My Approach Work with Everybody: Economics, Finance, Accounting, Marketing, Management, Computer Science, Statistics, Journalism, Financial Engineering, Library Science, etc. But Make it Compelling and Exciting Working with Reference Data, vs. Working with Historical Data, vs. Working with Real Time Data And Make it stick Viewing Screens, vs. Building Models 2017 R. Holowczak 5

6 Excel and Bloomberg Data Three main ways to get Bloomberg Data into Excel: Copy and Paste, Drag and Drop or Export to Excel from Bloomberg Terminal window Import Data Wizards available on the Bloomberg Ribbon bar Type in formulas directly: BDH, BDP, BDS Set of Ref. Data: BDS("MSFT US Equity","TOP_20_HOLDERS_PUBLIC_FILINGS") Historical Data: BDH("MSFT US Equity","PX_LAST","5/1/2017","5/31/2017") Real Time Data: BDP("MSFT US Equity", "LAST_PRICE") Search for Fields using the FLDS Function or Find Fields on Bloomberg ribbon bar 2017 R. Holowczak 6

7 International Finance Trading: Spot, Forwards, Futures, Options Cash flows each instrument represents How price discovery and trading are carried out Investments: International Portfolio Management International diversification and correlation Foreign Exchange Risk Corporate Finance: Multinational Transacting and investing Foreign Exchange Risk Operational Risk Market Imperfections International Opportunities What I like: Arbitrage conditions Markets are open and active 2017 R. Holowczak 7

8 Triangular Arbitrage Textbook Example BDP("EUR Curncy","BID") BDP("GBPEUR Curncy","ASK") BDP("GBP Curncy","BID") International Financial Management. Cheol S. Eun and Bruce G. Resnick. 3 rd Edition. McGraw Hill Page R. Holowczak 8

9 Triangular Arbitrage in Excel Holowczak, R. "Real Time Foreign Exchange Data Modeling in International Economics and Finance." Journal of Financial Education. Summer, pg R. Holowczak 9

10 Equity Arbitrage Simultaneously buying and selling a stock in two different markets Buy at the ASK Price in Market A Sell at the BID Price in Market B (If necessary) Use Exchange Rate between A and B Example of the Law of One Price in action From Prof. Gayle DeLong s International Finance course BDP("CAD Curncy", "Ask") BDP("SLF US Equity", "Ask") BDP("SLF CN Equity", "Ask") Investments: A Global Perspective. Jack C. Francis and Roger Ibbotson. Prentice Hall Page R. Holowczak 10

11 Equity Arbitrage in Excel Holowczak, R., "Incorporating Real Time Financial Data Into Business Curricula. Journal of Education for Business. Vol. 81 Number 1, September/October, Page R. Holowczak 11

12 Management of Transaction Exposure Approx. 1/3 of S&P 500 Corp. Revenue comes from outside of US 1 Survey: 45% of US Firms supply chain spending goes outside US 2 Contractual cash flows fixed in a foreign currency Simple Exercise: Your US company has issued a purchase order for 1,000,000 CAD worth of auto parts that will be delivered in 6 months. What are your alternatives for coming up with $1 million CAD in 6 months? Purchase CAD now in the Spot Market Wait 6 months and then purchase CAD in the Spot Market Purchase a FX Forward contract with CAD deliverable in 6 months Purchase FX Futures contracts with CAD deliverable in (about) 6 months Compare Costs vs. Risks 1 Bloomberg data via EQS Function 2 Managing Risk in the Global Supply Chain. University of Tennessee. Summer, BDP("CAD Curncy", "Ask") BDP("CAD6M Curncy", "Ask") BDP("CD3 Curncy","Ask") 2017 R. Holowczak 12

13 Spot vs. Forwards vs. Futures in Excel 2017 R. Holowczak 13

14 References Liu, L. G., Holowczak, R., and Onochie, J. "Using Professional Data Services in an Introductory Macroeconomics Course: A Critical Thinking Approach" The Journal of the Academy of Business Education. Volume 8. Fall pg Holowczak, R. "Real Time Foreign Exchange Data Modeling in International Economics and Finance." Journal of Financial Education. Summer, pg Holowczak, R. and Friedman, L. W. "Using Real World Financial Data to Make the Introductory Business Statistics Course More Relevant". Proceedings of the 2006 Decision Sciences Institute Annual Meeting. November San Antonio, Texas pp Holowczak, R., "Incorporating Real Time Financial Data Into Business Curricula." Journal of Education for Business. Vol. 81 Number 1, September/October, Page 3 8. Liu, L. and Holowczak, R. Using Reuters 3000 Xtra for Financial Information Education. Online Information Review: The International Journal of Digital Information Research and Use. 24(5), November, Page R. Holowczak 14

15 Questions 2017 R. Holowczak 15