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

Find out a particular solution to equation, Example: Find out a particular...

Example: Find out a particular solution to y'' - 4y' - 12 y = 3e 5t Solution The point here is to get a particular solution, though the first thing that we're going to

Explain that odd positive integer to be a perfect square, Show that for odd...

Show that for odd positive integer to be a perfect square, it should be of the form 8k +1. Let a=2m+1 Ans: Squaring both sides we get a2 = 4m (m +1) + 1 ∴ product of two

Intervals of validity, I've termed this section as Intervals of Validity si...

I've termed this section as Intervals of Validity since all of the illustrations will involve them. Though, there is many more to this section. We will notice a couple of theorems

Trigonometry, if tan theta =1,find the value of sin4 theta + cos4 theta

if tan theta =1,find the value of sin4 theta + cos4 theta

Arthemetic progreession, ball are arranged in rows to form an equilateral t...

ball are arranged in rows to form an equilateral triangle .the firs row consists of one abll,the second of two balls,and so on.If 669 more balls are added,then all the balls canbe

Shares and dividends, How do I proceed with a project on Shares and Dividen...

How do I proceed with a project on Shares and Dividends?

Diameter of the circle , The length of the diameter of the circle which tou...

The length of the diameter of the circle which touches the X axis at the point (1,0) and passes through the point (2,3) is ? Solution)  If a circle touches the x-axis, its equatio

Binimial, theory behind the greatest term in the binomial expansion

theory behind the greatest term in the binomial expansion

Introduction to learning to count, INTRODUCTION : Most of us, when plannin...

INTRODUCTION : Most of us, when planning the first mathematical experience for three-year olds, think in terms of helping them memorise numbers from 1 to 20. We also teach them to

Which of the subsequent binomials could represent the length, The area of a...

The area of a rectangle is represented through the trinomial: x 2 + x - 12. Which of the subsequent binomials could represent the length and width? Because the formula for the

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