Home Work (Risk Management and Derivatives)

Deadline: 10-Oct-2020

1. From the ^KSE-100 prices (01- JULY-1997 TO 30-Sep-2020), remove the prices that are
simply repeats of the previous day’s price because they indicate a missing observation.
Calculate daily log returns as Rt+1 = ln(St+1) - ln(St) where St+1 is the closing price on day t+1;
St is the closing price on day t , and ln (*) is the natural logarithm. Plot the closing prices
and returns over time. Check the Volatility clustering and Mean Reversion process.

2. Calculate the mean, standard deviation, skewness, and kurtosis of returns. Plot a histogram of
the returns with the normal distribution imposed as well. (Excel hints: You can either use the
Histogram tool under Data Analysis, or you can use the functions AVERAGE, STDEV,
SKEW, KURT, and the array function FREQUENCY, as well as the NORMDIST function.
Note that KURT computes excess kurtosis.)