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

Linear programming , A paper mill produces two grades of paper viz., X and ...

A paper mill produces two grades of paper viz., X and Y. Because of raw material restrictions, it cannot produce more than 400 tons of grade X paper and 300 tons of grade Y paper i

Gravity, There is a list of the forces which will act on the object. Gr...

There is a list of the forces which will act on the object. Gravity, F g The force because of gravity will always act on the object of course. Such force is F g   = mg

Interpretation of r – problems in interpreting r values, Interpretation of ...

Interpretation of r - Problems in interpreting r values A high value of r as +0.9 or - 0.9 only shows a strong association among the two variables but doesn't imply that th

Integration techniques, Integration Techniques In this section we are ...

Integration Techniques In this section we are going to be looking at several integration techniques and methods. There are a fair number of integration techniques and some wil

GCF, Find the GCF of 70 and 112

Find the GCF of 70 and 112

Find the coordinates of the other two vertices, The two opposite vertices o...

The two opposite vertices of a square are (-1, 2) and (3, 2). Find the coordinates of the other two vertices.

Example for introducing counting, Four-year-old Mariamma was reciting numbe...

Four-year-old Mariamma was reciting number names - some of them in order, and others randomly. The child's aunt, sitting nearby, asked her, "Can you write 'two'?" She said she coul

Geometry, how to make an obtuse scalene triangle FAT with m

how to make an obtuse scalene triangle FAT with m

What is her weekly paycheck assuming there are deductions, Kyra's weekly wa...

Kyra's weekly wages are $895. A Social Security tax of 7.51% and a State Disability Insurance of 1.2% are taken out of her wages. What is her weekly paycheck, assuming there are no

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