FINC621 Winter 2018-19 Lab Worksheet 01

Exploration of R in Finance (finc621-lab01)

Task 1: Charting Stock Time Series

##### 1A) Insert in the code chunk below the rest of the code to calculate and chart the time series for stock GE. Follow the example in the book. Add comments, where appropriate, explaining what the particular line(s) of code is/are executing/solving for.

library("quantmod")
##retrieve historical price data for General Electric Co. from Yahoo Finance
getSymbols('GE',src='yahoo', from="2000-01-01", to="2009-12-30")
#to see the adjusted close prices for the period
geAdj = GE$GE.Adjusted["2000-01-01/2009-12-30"] ; geAdj
##to see headers of file (OHLCV type)
names(GE)
#to comput the max, min, and mean value
max(geAdj); min(geAdj); mean(geAdj)
#to chart data
chartSeries(GE)

##to save data to disk
saveRDs(GE,file= "GE.rds")

Task 2: Comparing Performance of Stocks Time Series

##### 2A) Insert the code chunk to chart instead the performance of Value Line Index VLIC (sort of benchmark), and four other stocks of your choice over a time period dating back one year from present date.

library("quantmod")
symbols=c(’ˆVLIC’,’GOOG’,’AMZN’,’MSFT’,’JPM’)}
getSymbols(symbols,src=’yahoo’,from="2017-11-13",to="2018-10-13")
  #obtain adjusted closed

VLICad = VLIC$VLIC.Adjusted; GOOGad= GOOG$GOOG.Adjusted;
+ AMZNad=AMZN$AMZN.Adjusted; MSFTad=MSFT$MSFT.Adjusted;
+ JPMad = JPM$JPM.Adjusted
 #compute cumulative sum (cumsum) of daily returns (Delt)
+ #Remove first term of the series, with [-1,],
+ #since cumsum is not defined for it.

vl = cumsum((Delt(VLICad)*100)[-1,])
go = cumsum((Delt(GOOGad)*100)[-1,])
am = cumsum((Delt(AMZNad)*100)[-1,])
ms = cumsum((Delt(MSFTad)*100)[-1,])
jp = cumsum((Delt(JPMad)*100)[-1,])
 ###range of values for the plot

lim = c(min(vl,go,am,ms,jp),max(vl,go,am,ms,jp))

###the plot

plot(vl,main="",ylim=lim,xlab="dates",ylab="% benefits")
lines(ge,col="green"); lines(ko,col="red")
lines(ap,col="violet"); lines(md,col="yellow")
legend(x="topleft",cex=0.4,c("NFLX","GOOG","AMZN","MSFT","JPM"),
+ lty=1, col=c("black","green","red","violet","yellow"))

##### 2B) Write the mathematical form/representation, using proper math symbols, to describe the formula being calculated and plotted in the code

\(\sum_{t=0}^{T}\) ln((\(P_{T}\) - \(P_{0}\))/(\(P_{T-1}\)) * 100)

##### 2C) Write a paragraph, in your own words, comparing the stock performances based on your assessment of the companies general business and their valuation vis-a-vis the market overall performance, and pertinent econonomical factors.

Task 3: Problem(s) Solving

##### 3A) Solve for 1.3.8 Problem/p. 36.

\(\Delta\) = (20-0)/(40-15) = 0.8

\(\hat{B}\) = (\(\Delta\) \(S_{d}\) - \(C_{d}\)) / (1 + r)) = (\(\Delta\) \(S_{u}\) - \(C_{u}\))

\(\hat{B}\) = ((.8)15-0)/(1.025) = ((.8)40-20)/(1.025)= 11.7

C = \(\Delta\)S - (1+r)\(\hat{B}\) C = 0.8(20) - (1.025) (11.7) = $4.30

Put option price by put call parity

Call - put = stock - strike 4.30 - put = 25 - 20

put = $0.70

##### 3B) Solve for 1.3.9 Problem/p. 36

\(\Delta\)put + \(\Delta\)call = 1