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

Surds and logarithms, what are these all about and could i have some exampl...

what are these all about and could i have some examples of them please

Differentiate outline function in chain rules, Differentiate following. ...

Differentiate following. Solution : It requires the product rule & each derivative in the product rule will need a chain rule application as well. T ′ ( x ) =1/1+(2x) 2

Bernoulli differential equations, In this case we are going to consider dif...

In this case we are going to consider differential equations in the form, y ′ +  p   ( x ) y =  q   ( x ) y n Here p(x) and q(x) are continuous functions in the

An even function, Assume that   i)  Determine all the roots of f...

Assume that   i)  Determine all the roots of f(x) = 0. ii)  Determine the value of k that makes h continuous at x = 3. iii)  Using the value of k found in (ii), sh

Confidence interval, Confidence Interval The interval estimate or a 'co...

Confidence Interval The interval estimate or a 'confidence interval' consists of a range as an upper confidence limit and lower confidence limit whether we are confident that a

Design a diagram by transformation, On a graph, design a diagram by transfo...

On a graph, design a diagram by transformation the given graph of f (x), -2 ≤ x ≤ 2. Briefly Define the other graphs in terms of f (x) and specify their domains. The diagram n

Example of developing an understanding, In class 1, the teacher had written...

In class 1, the teacher had written down the digits 0,1, ...., 9 on the board. Then she made all the children recite the corresponding number names. Finally, she made them write th

Find quadratic equation using the quadratic formula, Find quadratic equatio...

Find quadratic equation using the Quadratic Formula: Solve the subsequent quadratic equation using the Quadratic Formula. 4x 2 + 2 = x 2 - 7x: Solution: Step 1.

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