Currency Volatility Analysis

1. /*CURRENCY VOLATILITY PROJECT
Author: Phil Duhe, November, 2009
***************************PART A******************************************/
*Create two temporary data sets that contain the original data in the
text files Data1.txt and Data2.txt;
*system options for page appearance;
*Establish a file reference for data1.txt;
filename DATA1 'C:NewSASDATA1.TXT';
*reading the data from data1.txt;
data A;
infile DATA1 firstobs=7;
input date yymmdd6. dow bp cd dm;
*Change all the 0 values to missing;
if bp <= 0 then bp = .;
if cd <= 0 then cd = .;
if dm <= 0 then dm = .;
run;
*establish file reference for data2.txt;
filename DATA2 'C:NewSASDATA2.TXT';
*reading the data from data2.txt;
data B;
infile DATA2 firstobs=7;
input date: yymmdd6. dow jy sf;
*Change all the 0 values to missing;
if jy <= 0 then jy = .;
if sf <= 0 then sf = .;
run;
************************END OF PART A*********************************;
***************************PART B*************************************;
*Sorting data for merge;
proc sort data=A;
by date dow;
run;
proc sort data=B;
by date dow;
run;
*************************PART B C D &E**********************************;
*Creating permanent merged data set MyLib.MergedData;
options ls=80 ps=60 pageno=1 nodate center;
libname MyLib 'C:SASIntro';
data MyLib.MergedData;
merge A(in=ina) B(in=inb);
by date dow;
if ina and inb;*merged set contains nonmissing observations in A and B;
format date mmddyy8. dow 2.0 bp--sf 7.6;
*Labeling the variables(PART E);

2. label date = 'Date'
dow = 'Day of Week'
bp = 'British Pound'
cd = 'Canadian Dollar'
dm = 'Deutsche Mark'
jy = 'Japanese Yen'
sf = 'Swiss Franc';
run;
/*Print output*/
proc print data=MyLib.MergedData Width=FULL label;
title 'Merged Data Set';
*show date and not #observations;
id date;
var dow bp--sf;
run;
******************************END OF PART B D
&E****************************;
***********************************PART
C*************************************;
data MyLib.LogResult (drop=bp cd dm jy sf
zbp zcd zdm zjy zsf);
set MyLib.MergedData;
zbp = bp / (lag(bp)) ;
zcd = cd / (lag(cd)) ;
zdm = dm / (lag(dm)) ;
zjy = jy / (lag(jy)) ;
zsf = sf / (lag(sf)) ;
*Calculate the log of daily returns(PART C);
lgbp = log(zbp);
lgcd = log(zcd);
lgdm = log(zdm);
lgjy = log(zjy);
lgsf = log(zsf);
*Format and label the variables;
format date mmddyy8. dow 2.0 lgbp--lgsf 7.6 ;
*Labeling the variables(PART E);
label date='Date'
dow ='Day of Week'
lgbp='British Pound'
lgcd='Canadian Dollar'
lgdm='German Deutschmark'
lgjy='Japanese Yen'
lgsf='Swiss Franc';
run;
options ls=80 ps=60 pageno=1 nodate center;
proc print data=MyLib.LogResult Width=Full label;
title 'Log of Daily Returns';
id date;
var dow lgbp--lgsf;
run;
*Volatility PART C;
/*Generate standard deviations of random variables

3. create a new data set based on PROC MEANS*/
proc means data=MyLib.LogResult std n noprint;*no need to print means
statistics;
var lgbp--lgsf;
*Outputting the Results into the dataset VolResult;
output out=MyLib.VolResult(drop= _TYPE_ _FREQ_)
std=S_bp S_cd S_dm S_jy S_sf
n = N_bp N_cd N_dm N_jy N_sf;
run;
/*Print to verify standard deviations*/
proc print data=MyLib.VolResult Width=Full label;
options ls=80 ps=60 pageno=1 nodate center;
title 'Standard Deviations of Log of Daily Returns';
var S_bp--S_sf;
run;
*Calculate the estimate of annual volatility;
data MyLib.AnnVol(drop=S_bp S_cd S_dm S_jy S_sf
N_bp N_cd N_dm N_jy N_sf);
set MyLib.VolResult;
*Annualized volatility calculation;
Vol_bp =S_bp*sqrt(250/N_bp);
Vol_cd =S_cd*sqrt(250/N_cd);
Vol_dm =S_dm*sqrt(250/N_dm);
Vol_jy =S_jy*sqrt(250/N_jy);
Vol_sf =S_sf*sqrt(250/N_sf);
label Vol_bp = 'British Pound'
Vol_cd = 'Canadian Dollar'
Vol_dm = 'German Deutschmark'
Vol_jy = 'Japanese Yen'
Vol_sf = 'Swiss Franc';
run;
proc print data=MyLib.AnnVol Width= FULL label;
title1 'Annualized Foreign Exchange Rate Volatilty';
title2;
title3 'Major Trading Currencies';
run;
********************************END OF PART C******************************;
*******************************PART F**************************************;
/*Create an external file in (ASCII format) using PUT statement
and appropriate FORMAT statement*/
proc sort data=MyLib.LogResult;
by date dow;
run;
Data _null_;
set MyLib.LogResult;
file 'C:UsersPhilSasProject'; **write merged data to output
file;
if _n_=1 then do;*do loop to establish report headings and column spacings;
* report headings;
put 'SAS X405, UCBX, November 2009, Term Project';
put 'Phil Duhe';

4. put ' ';
put 'Natural Logarithm of Daily Returns';
put 'of Five Currencies';
put 'June, 1973 to November, 1987';
put ' ';
put ' ';
put ' ';
put ' '
' British'
' Deutsche'
' Canadian'
' Japanese'
' Swiss'
;
put ' '
' Pounds'
' Marks'
' Dollars'
' Yen'
' Franc'
;
put ' ';
put ' Date'
' LGBP'
' LGCD'
' LGDM'
' LGJY'
' LGSF'
;
put ' - ';
end; * end if 1st obs;
put @2 date MMDDYY8. @15lgbp 7.6 @25lgcd 7.6 @35lgdm 7.6 @45lgjy
7.6 @55lgsf 7.6;
run;
******************************END OF PART
F**********************************;
********************************PART
G***************************************;
/*Calculate the variance-covariance matrix of the daily return of random
variables*/
/*Note: The variance of a variable is a measure of the dispersion of the
variable
around its mean value.*/
/*Note: Covariance is a measure of the strength of the link between two
random numerical
variables*/
ods select Cov;
proc corr data=MyLib.LogResult cov nocorr nosimple;*just print the variance-
covariance matrix;
options ls=180 ps=65 pageno=1 nodate center;*landscape;
title1 'Variance-Covariance Matrix';
title2;
title3 'Log of Daily Returns of Major FX Currencies';

5. var lgbp--lgsf;
run;
**********************************END OF PART G*****************************;
************************************PART
H***********************************;
/*calculate the variance-covariance matrix for Mondays*/
data MyLib.Monday;
set MyLib.LogResult;
where dow EQ 1;*read input data set for Monday only;
run;
ods select Cov;
proc corr data=MyLib.Monday cov nocorr nosimple ;*print covariances and not
descriptive statistics;
options ls=180 ps=60 pageno=1 nodate nocenter;*landscape;
title 'Monday Trading Days';
var lgbp--lgsf;
run;
/*calculate the variance-covariance matrix for Thursdays*/
data MyLib.Thursday;
set MyLib.LogResult;
where dow EQ 4;*read input data set for Thursday only;
run;
ods select Cov;
proc corr data=MyLib.Thursday cov nocorr nosimple;*print covariances and not
descriptive statistics;
options ls=180 ps=60 pageno=1 nodate nocenter;*landscape;
title 'Thursday Trading Days';
var lgbp--lgsf;
run;
***********************************END OF PART H**************************;
**************************************PART I******************************;
/*Calculate the correlation coefficient matrix of the log of daily returns*/
proc corr data=MyLib.LogResult Pearson nosimple nomiss rank;
options ls=180 ps=60 pageno=1 nodate nocenter;*landscape;
title1 'Correlation Coefficient Matrix';
title2;
title3 'Log of Daily Returns of Major FX Currencies';
var lgbp--lgsf;
run;
***********************************END OF PART I***************************;
**************************************PART J*******************************;
/*Calculate the skewness, kurtosis of the log of daily return of all the
random variables*/
/*Skewness: measures the tendency of the deviations to be larger in one
direction than in the other. The
sample sknewness can be either positive or negative. Observations that have
a normal distribution
should have a sknewness near zero(0).*/

6. /*Kurtosis: measures the heaviness of tails of the data distribution.
Observations that are normally
distributed should have a kurtosis near zero(0).*/
proc means data=MyLib.LogResult skewness kurtosis;
options ls=80 ps=60 pageno=1 nodate center;
title 'Skewness and Kurtosis of Log of Daily Returns';
var lgbp--lgsf;
run;
**********************************END OF PART J*************************;
****************OPTIONAL************************************************;
/*EXERCISE K*/
/*Write a macro program so that you can repeatedly excecute correlation
coefficients for different data sets without retyping the procedure*/
%macro example(request= , mydata= );*parameter variables set to null;
%if &request=print %then
%do;
proc print data=&mydata;*print data set;
run;
%end;
%else %if &request=correlation %then*run the correlation;
%do;
proc corr data=&mydata pearson nosimple nomiss rank;*rank the
correlations;
run;
%end;
%mend example;
***********************************************************************;
*Example of Calling MACRO Example;
%example(request=correlation, mydata=MyLib.LogResult)*pass in parameter
variables;
***********************************************************************;
/*Extra Programs*/
/*Univariate Statistics for Log of Daily Returns*/
ods select BasicMeasures ExtremeObs;*Basic statistics and extreme
observations for
nominal value of fx currencies;
title "Basic Measures";
proc univariate data=MyLib.LogResult;
var lgbp--lgsf;
run;
title "Log of Daily Returns vs. Normal Distribution";
proc univariate data=MyLib.LogResult noprint;
var lgbp--lgsf;
histogram lgbp--lgsf/normal (color=red w=2) ;
inset mean='Mean' (7.6)
std ='Standard Deviation' (7.6)/font='Arial'
pos=nw
height=3;

7. run;
*******************************************************************;
ods html;
ods graphics on;
proc corr data=MyLib.LogResult nomiss noprint plots=matrix;
var lgbp--lgsf;
title 'Correlation Coefficients Using PROC CORR';
run;
ods graphics off;
ods html close;
********************************************************************;
ods html;
ods graphics on;
proc corr data=MyLib.LogResult nomiss noprint
plots=scatter(alpha = .20 .30);
var lgbp--lgsf;
run;
ods graphics off;
ods html close;