The project arms at giving the students some experience of analyzing financial data

Each group will:

Choose two stocks, one American and one Swedish, and download historical data for the last three years. This can be done from many places, e g yahoo.finance.
Plot the returns for the same period and describe what the process looks like. Also make a histogram for your returns. How does this histogram differ from e g a normal distribution.
Calculate a rolling backward directing 20-day daily volatility window (i e for each time t you use the days t-20 to t-1), noting that the volatility is the standard deviation of the daily returns. Plot as a timeseries. Describe what the time series for this volatility looks like. Scale the volatility to a yearly volatility (\sigma_y = \sigma_d * \sqrt{252} where 252 is the number of trading days in a year) and give the average number for the last three years.
Plot your returns above divided by your volatility estimates for each day. What does this process look like. What does its histogram look like?
Choose an option that is close to At-the-Money for each stock. This can also be found on yahoo.finance. Save the price of these options, and make sure that you have an estimate of the stocks volatility, from above, for the same day from which you to took the price.
Observe the difference between the theoretical Black-Scholes price, with your volatility estimate as an input, and the market price. What can this difference depend on?

Remarks:

The project is not compulsary and can be worked out in groups of max 4 students.
The report has to be submitted through Canvas at this link: Project Submission
Together with the report you have to submit a statement, signed by all members of the group, certifying that this report is your own work and that all members of the group have equally contributed to the assignment. All reports will be subjected to a plagiarism check. Information on how to avoid plagiarism and on Chalmers policy on plagiarism can be found here.Links to an external site.
The deadline for submission is January 2nd, 2024 at 23.59. The grade on the project (max 2 points) will be communicated the following week. The bonus points of the Matlab project are valid only for the exams in 2024.
Some help and tips on how to carry out the project are given in the lecture on November 8th. Due to the high number of students in the course, no further assistance on the project can be provided.
The grade of the project is mostly based on the "aesthetical'' quality of the report, e.g., on having nice and informative plots. You should also write a short text explaining how the Matlab codes work, e.g., as comments within the codes themselves. An incorrect interpretation of the results will not affect the grade, so be bold in your arguments!
You may carry out the project using another program language instead of Matlab, e g Python, but remember to explain how the codes work!

Learning MATLAB, Tobin A. Driscoll. Provides a brief introduction to Matlab to the one who already knows computer programming. Available as e-book from Chalmers libraryLinks to an external site..
Physical Modeling in MATLAB 3/E, Allen B. Downey
The book is free to download from the webLinks to an external site.. The book gives an introduction for those who have not programmed before. It covers basic MATLAB programming with a focus on modeling and simulation of physical systems.