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

Infinite, why cant we find the value of 1 upon zero

why cant we find the value of 1 upon zero

Statistical estimation, Statistical estimation This is the procedure of...

Statistical estimation This is the procedure of using statistic to estimate a population parameter This is divided into point estimation whereas an estimate of a population

Definition of vertical asymptote, Vertical asymptote Definition : The funct...

Vertical asymptote Definition : The function f(x) will contain a vertical asymptote at x = a if we contain any of the following limits at x = a .   x→a- Note as well that it

Probability, A man is known to speak truth 3 out of 4 times.He throws adi...

A man is known to speak truth 3 out of 4 times.He throws adie and reports it is a six. Find the probability that it is actually a six. Solution)  we can get a six if a man s

Share and dividend, #a invests Rs 15000IN COMPANY PAYING 10%WHEN Rs100 SHAR...

#a invests Rs 15000IN COMPANY PAYING 10%WHEN Rs100 SHARE IS SOLD AT A PREMIUM OF Rs 20 after a yearASOLD SHARES AT Rs80 EACHAND INVESTEDPROCEEDS IN Rs75SHARES SELLING AT Rs 100 WZI

Parallel lines, Parallel to the line specified by 10 y + 3x= -2 In this...

Parallel to the line specified by 10 y + 3x= -2 In this case the new line is to be parallel to the line given by 10 y ? 3x ? -2 and so it have to have the similar slope as this

Solving trig equations with calculators part ii, Solving Trig Equations wit...

Solving Trig Equations with Calculators, Part II : Since this document is also being prepared for viewing on the web we split this section into two parts to keep the size of 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