Chapter 1 Introduction
1.1 Research Background and Problem Statement
"Person who owns the information - owns the World"- says the famous proverb.And its meaning is absolutely clear: the greater the amount of information about thephenomenon or process is owned by the person, the more chances he has to reach thegoal in relation to this phenomenon or process.As everyone known, one of these phenomenons is the behavior of financial timeseries. The acknowledgement of it is inexhaustible for decades the flow of works on thetopic of financial markets, which sometimes proved the opposite point of view, as wellas a huge variety of methods and approaches used for their research.Also researches in the sphere of currency market are of great relevance nowadays.This is not a secret for anybody that the exchange rate affects all subjects: states,companies and each of us. So let's take a closer look at the impact of exchange rates ona large company. Our choice was the ICBC. In 2015 the Industrial and CommercialBank of China for the third year in a row topped the ranking of the largest publiccompanies Global 2000, annually published by Forbes.This work is an attempt to understand the fundamental existence or absence of thepossibility of predicting exchange rates, as well as the ability of using obtained resultsto improve financial performance of a particular company.
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1.2 Objectives and Significance of the Research
1.2.1 Research Questions and Objectives
There are 2 main aims of this work: to analyze exchange rates using methods offorecasting and to develop methods of application of the forecasts the exchange rates forthe improvement of financial results of the ICBC.To succeed in achieving the goals the main tasks to solve were singled out:(1) To consider the theoretical foundations of exchange rates and methods of theirforecasting;(2) To study the peculiarities of the Chinese currency market and factorsinfluencing the exchange rate of the Yuan;(3) To conduct financial and economic analysis of the ICBC financial documents;(4) To forecast the exchange rates with using methods of technical, fundamental,statistical analyses and analysis, connecting with usage of computer software;(5) To formulate methods to improve the financial results of the ICBC on the basisof forecasts of exchange rates.There is the possibility of self-control. In case of rejection at any stage thepredicted values of the exchange rate from the real values, there will be an additionalunplanned analysis of possible errors.
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Chapter 2 Theoretical Background and Research Methodology
2.1 The Basic Information about the ICBC
Industrial and Commercial Bank of China was established on 1 January 1984. On28 October 2005, the Bank was wholly restructured to a joint-stock limited company.On 27 October 2006, the Bank was successfully listed on both Shanghai StockExchange and the Stock Exchange of Hong Kong Limited.Through its continuous endeavor and stable development, the Bank has developedinto the top large listed bank in the world, possessing an excellent customer base, adiversified business structure, strong innovation capabilities and market competitivenessand providing comprehensive financial products and services to 5,320 thousandcorporate customers and 496 million personal customers.The Bank continued to promote reform, innovation and operation transformation.The Bank’s assets and liabilities business kept stable profitability during the structuraladjustment. Retail banking, asset management and investment banking becameimportant engines driving the profit growth, and the development of internet-basedfinance with leading edge gave impetus to the fundamental reform on operation andmanagement models and service methods. The pattern of internationalized anddiversified operation was further improved, covering 42 countries and regions, andoverseas operations and comprehensive subsidiaries of fund, insurance and leasingcontributed more to the Bank’s profit-making. You can see the label of ICBC by figure2-1.In 2015, the Bank was named the ―Best Emerging Markets Bank‖ by Euromoney,and ranked 1st place among the Top 1000 World Banks by the Banker and the Global2000 listed by the US magazine Forbes for the third consecutive year.
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2.2 Exchange Rates: Basic Information and Characteristics
In finance, an exchange rate between two currencies is the rate at which onecurrency will be exchanged for another. It is also regarded as the value of one country’scurrency in relation to another currency.[1]For example, exchange rate of 6,92 ChineseYuan (CNY) to the United States dollar (USD) means that RMB 6,92 will be exchangedfor each USD 1 or that USD 1 will be exchanged for each RMB 6,92. In this case it issaid that the price of a dollar in relation to Yuan is RMB 6,92, or equivalently that theprice of a Yuan in relation to dollars is 1/6,92.In the foreign exchange market, a currency pair is the quotation of the relativevalue of a currency unit against the unit of another currency. The quotation EUR/USD1.3225 means that 1 Euro will buy 1.3225 US dollars. In other words, this is the price ofa unit of Euro in US dollars. Here, EUR is called the "Fixed currency", while USD iscalled the "Variable currency".[2]One of the most important concepts used in the foreign exchange market, is theconcept of real and nominal exchange rate.Nominal currency (exchange) rate is a relative price of currencies of two countries,i.e. the price of currency in terms of another, see formula (2-1). The increase in exportsof goods and services from a given country increases the demand for the nationalcurrency abroad and at the same time forms the supply of foreign currency in thecountry.
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Chapter 3 Data presentation, analysis and prediction ......... 28
3.1 Forecast of exchange rates and analysis ..... 28
3.2 Relationship between exchange rates and financial results of the ICBC ..... 53
3.2.1 Financial analysis of the ICBC.... 53
3.2.2 Impact of exchange rates on financial results of the ICBC ........... 62
3.2.3 Advantages and disadvantages of forecasting capabilities for the ICBC .......... 63
3.3 Features of application of the obtained forecasts for the ICBC.......... 64
3.4 Summary of the chapter.......... 66
Chapter 4 Summary of findings and recommendations ...... 68
4.1 Summary of findings .... 68
4.2 Recommendations and suggestions for further research .......... 72
Chapter 4 Summary of Findings and Recommendations
4.1 Summary of Findings
Forecasting exchange rates is a complex and multistep process, which involves theuse of different prediction methods. In this investigation, were examined three basicmethods of forecasting, and also laid the foundation for the future development of suchforecasting method as a method based on the usage of computer software. It is possibleto talk about the possibility of using any of the methods applied in a real situation;however each of them has its own characteristics and limitations. Consider each of themethods of forecasting exchange rates separately.Fundamental analysis is fairly simple in practical application; however, theexchange rate is not always subject to the general established laws. This is because atthe same time the exchange rate of any currency pair is affected by many factors asunidirectional and multidirectional. Thus, based on the data obtained in fundamentalanalysis you should first determine whether always there is the influence of thesefactors on the exchange rate, whether it happens sometimes or does not occur at all.Technical analysis on the contrary allows in advance finding short-termfluctuations in the trend and using them to complete transactions with a positive result.Technical analysis has various methodologies and tools to predict changes in exchangerates. However, as in the case with fundamental analysis, not every single method orindicator can be used to predict any currency pair. For each exchange rate separately weneed to pick up those technical tools are more likely to have matching predictions in thepast and also simultaneously use tools of different methodologies that can reduce therisk of building a incorrect forecast.Statistical analysis at first glance seems to be one of the most convenient methodsof forecasting, but it is not predict the behavior of exchange rates, but only indicates theexistence or absence of patterns of behavior with respect to another selected indicator.That is, it acts as a base for further research, and having found certain correlations, butalso should be investigated the factors affecting that indicator and studied the course ofits development. However, in certain situations, as with exchange rates of CNY andCNH this may be enough, as the second one just follows the first.
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Conclusion
This research had as its main goal to determine the existence or absence of arelationship between the ability to predict exchange rates and financial performance ofthe Industrial and Commercial Bank of China. In the result we can confidently sayabout the existence of the impact of forecasting on the performance of the company.Was delivered 2 main aims of this work: to analyze the exchange rates usingmethods of forecasting and to develop methods of application of the forecasts theexchange rates for the improvement of financial results of the ICBC. Was performed themain tasks performed in this study: to consider the theoretical foundations of exchangerates and methods of their forecasting; to study the peculiarities of the Chinese currencymarket and factors influencing the exchange rate of the Yuan; to conduct financialanalysis of the ICBC financial documents; to forecast the exchange rates with usingmethods of technical, fundamental, statistical analyses and analysis, connecting withusage of computer software; to formulate methods to improve the financial results of theICBC on the basis of forecasts of exchange rates. Thus from the point of view of theplanned work, all of the investigations were completed and analyzed.Due to the work performed it became clear the ability to use existing forecastingmethods such as fundamental analysis, technical analysis and statistical analysis. Alsowas confirmed the possibility of using these methods for forecasting selected exchangerates: the US Dollar to the Yuan, the Euro to the Yuan and the Euro to the US Dollar.That is, for each of the currency pairs were applied different forecasting methodsand defined the characteristics of their application. It was found that each of theprediction methods is unique, belongs to different periods and based on differentexchange rate theories; however, in order to achieve maximum accuracy and reliabilityof the forecast is a combination of all the studied methods of forecasting exchange rates.Also were established conditions for the development of the method of forecastingexchange rates based on the using of special computer programs. The age of technologyin which we live inevitably confronts us with the problem of automation of all processes,which will handle computer software. It is clear that the algorithms created by theprogram will be based on other forecasting methods and their analysis. Thus, thismethod will allow us to combine the results and benefits of the previously mentionedforecasting methods, at the same time reducing costs and time spent on the process ofcreating a forecast of exchange rates.#p#分页标题#e#
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References (abbreviated)
