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 a power series representation for the function, Find a power series re...

Find a power series representation for the subsequent function and find out its interval of convergence. g (x) = 1/1+x 3 Solution What we require to do here is to rela

Unitary method, what is the history of unitary method

what is the history of unitary method

Elliptic paraboloid - three dimensional spaces, Elliptic Paraboloid Th...

Elliptic Paraboloid The equation which is given here is the equation of an elliptic paraboloid. x 2 /a 2 + y 2 /b 2 = z/c Like with cylinders this has a cross section

Curvature, steps to trace the cartesian curve

steps to trace the cartesian curve

What is the net surface area to be painted, You are painting the surface of...

You are painting the surface of a silo that has a diameter of 16 ft and height of 50 ft. What is the net surface area to be painted? Consider the top of the silo is  1/2 a sphere

Calculus online, need help completing my online text. can provide login det...

need help completing my online text. can provide login details

Divergence test - sequences and series, Divergence Test Once again...

Divergence Test Once again, do NOT misuse this test.  This test only says that a series is definite to diverge if the series terms do not go to zero in the limit.  If the

Least common denominator, Let's recall how do to do this with a rapid numbe...

Let's recall how do to do this with a rapid number example.                                                     5/6 - 3/4 In this case we required a common denominator & reme

Assigment, Q1: Find three positive numbers whose sum is 54 and whose produc...

Q1: Find three positive numbers whose sum is 54 and whose product is as large as possible.

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