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

Real Analysis/Advanced Calculus (Needs to be a full proof), Both need to be...

Both need to be a full page, detailed proof. Not just a few lines of proof. (1) “Every convergent sequence contains either an increasing, or a decreasing subsequence (or possibly

Iit-jee questions, can u tell me a website for iit-jee questions?

can u tell me a website for iit-jee questions?

Calculate log equation, Calculate log equation: Calculate log 10 2 - ...

Calculate log equation: Calculate log 10 2 - log 10 3. Solution: Rule 2. log 10   (A/B): log 10   A - log 10   B log 10   2 - log 10   3 = log 10   (2/3) =

Determine all possible solutions to ivp, Determine all possible solutions t...

Determine all possible solutions to the subsequent IVP. y' = y ? y(0) = 0 Solution : First, see that this differential equation does NOT satisfy the conditions of the th

Determine the transfer function, A digital filter has zero at z=a and poles...

A digital filter has zero at z=a and poles at z=b andz=c, where a, b, c are the real constants. Determine the transfer function and the frequency response function of the filter an

Pythagorean theorem, How do you find the perimeter of an irregular shape us...

How do you find the perimeter of an irregular shape using Pythagorean theorem?

Integration, It is known that a radioactive material decays at a rate propo...

It is known that a radioactive material decays at a rate proportional to the amount present.If after a period of 12 years,a 2g piece of radium weighs 1.99g.How long will it be befo

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