Holiday Parties

Continuing off my last post, my recent project has been analyzing profits and losses in the Chinese RMB currency. My task: compare the one-month forward rate of RMB with the actual rate one month later. The company profits when the forward rate beats the actual rate.

That seems like a very simple calculation and it is but the trick is ligning up the dates correctly since there are a truck-load of rules associated with when a forward gets transacted one month later. For instance, if a forward is settled on the 28th of February, the one month forward date of completion is the 31st of March not the 28th of March. Other rules involve holidays: it takes two days to settle a trade and a trade cannot be settled on a holiday but a holiday can count as one of the waiting days so long as the trade is not actually settled on that day. With the RMB, I had to match the correct days and rates to calculate profits and losses.

While I’m sure someone can design a program to run the numbers on this, I did it all by hand. Somewhat tedious analysis work with excel files but certainly valuable in understanding how the system works.

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