Estimates the probabilities of price changes, Mathematics

Assignment Help:

Mr. Hoper is in charge of investments for the golden horizon company. He estimates from past price fluctuations in the gold market that the probabilities of price changes on a given day are dependent upon price changes on the previous day. If gold price increases or remains constant, the following distribution represents the probability of price changes in $ per ounce for the day to follow:

Price change ($)               Probability

-4                                             0.05

-2                                             0.10

No change                               0.20

+2                                            0.25

+4                                            0.30

+6                                            0.10

On the other hand, if gold prices reduces on a given day, the next day's distribution of price changes in $ per ounce is:

Price change ($)                          Probability

-6                                                        0.10

-4                                                         0.30

-2                                                         0.25

No change                                           0.15

+2                                                        0.20

Test the policy of buying 100 ounces when prices drop for the preceeding three days and selling 100 ounces when prices rise for the preceding three days.

Simulate for thirty days. Assume at the start that mr. hoper has 1000 ounce of gold for which he has paid $300 per ounce. Determine how much gold will he own at the end of thirty days, as well as his net profit/loss position during this period. Assume at the start that gold is selling at $300 per ounce and that during the day before start of simulation, gold prices rose.


Related Discussions:- Estimates the probabilities of price changes

Simple harmonic motion, prove that the composition of two simple harmonic o...

prove that the composition of two simple harmonic of the same period and in the same straight line is also a simple harmonic motion of the same period.

In how many years is the population expected to be 42, The population of a ...

The population of a particular city is increasing at a rate proportional to its size. It follows the function P(t) = 1 + ke 0.1t where k is a constant and t is the time in years.

Example of parametric equations and parametric curves, Draw the parametric ...

Draw the parametric curve for the subsequent set of parametric equations. X = t 2 +t Y=2t-1 -1 t 1 Solution Note that the only dissimilarity here is the exis

Systems of equations, Since we are going to be working almost exclusively a...

Since we are going to be working almost exclusively along with systems of equations wherein the number of unknowns equals the number of equations we will confine our review to thes

Area with polar coordinates - parametric equations, Area with Polar Coordin...

Area with Polar Coordinates In this part we are going to look at areas enclosed via polar curves.  Note also that we said "enclosed by" in place of "under" as we usually have

Determine the permutation, There are 6 contestants for the post of chairman...

There are 6 contestants for the post of chairman secretary and treasurer. These positions can be filled by any of the 6. Find the possible no. of ways whether the 3 positions may b

What is box-and-whisker plot, Q. What is Box-and-Whisker Plot? Ans. ...

Q. What is Box-and-Whisker Plot? Ans. Line graphs or stem-and-leaf plots become difficult to manage when there is a large amount of data. Box-and-whisker plots help summa

Tangent lines, Recall also which value of the derivative at a specific valu...

Recall also which value of the derivative at a specific value of t provides the slope of the tangent line to the graph of the function at that time, t. Thus, if for some time t the

Complex roots - second order differential equations, We will be looking at ...

We will be looking at solutions to the differential equation, in this section ay′′ + by′ + cy = 0 Wherein roots of the characteristic equation, ar 2 + br + c = 0 Those

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd