Holowczak Exploring International Finance …...Exploring International Finance using Real‐Time...

Exploring International Finance using Real‐Time Data from

BloombergRichard Holowczak, PhD

Paul H. Chook Department of Information Systems and StatisticsZicklin School of BusinessBaruch College, CUNY

[email protected]

© 2017 R. Holowczak 1

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


Wasserman Trading Floor / Subotnick Center• Opened in 2000• 7,200 Sq. Ft. space: Trading Floor, Seminar Room, Development Classroom and Research Lab

© 2017 R. Holowczak 3Upgraded in 2016: www.baruch.cuny.edu/MBPBrewerSubotnickribboncutting.htm

Photo Credit: Mathieu Asselin

My naive view of finance

Corporate Finance

Investments

Trading


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


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


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


Triangular Arbitrage – Textbook Example

International Financial Management. Cheol S. Eun and Bruce G. Resnick. 3rdEdition. McGraw Hill. 2004. 9

BDP("EUR Curncy","BID")

BDP("GBPEUR Curncy","ASK")

BDP("GBP Curncy","BID")


Triangular Arbitrage in Excel

Holowczak, R. "Real Time Foreign Exchange Data Modeling in International Economics and Finance." Journal of Financial Education. Summer, 2007. pg. 23-36.


Equity Arbitrage


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. 2002. Page 58

• 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

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, 2005. Page 3 ‐ 8.

Management of Transaction Exposure• Approx. 1/3 of S&P 500 Corp. Revenue comes from outside of US1

• Survey: 45% of US Firms’ supply chain spending goes outside US2

• 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

© 2017 R. Holowczak 122 Managing Risk in the Global Supply Chain. University of Tennessee. Summer, 2014.http://globalsupplychaininstitute.utk.edu/publications/documents/Risk.pdf

1 Bloomberg data via EQS Function

BDP("CAD Curncy", "Ask")

BDP("CAD6M Curncy", "Ask")

BDP("CD3 Curncy","Ask")

Spot vs. Forwards vs. Futures in Excel


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 2007. pg. 57‐75.

• Holowczak, R. "Real Time Foreign Exchange Data Modeling in International Economics and Finance." Journal of Financial Education. Summer, 2007. pg. 23‐36.

• 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 18‐21. San Antonio, Texas. 2006. pp. 25411 – 25416.

• Holowczak, R., "Incorporating Real Time Financial Data Into Business Curricula." Journal of Education for Business. Vol. 81 Number 1, September/October, 2005. 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, 2000. Page 371‐380.

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