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

Conditional probability: dependent events, We can define the conditional pr...

We can define the conditional probability of event A, given that event B occurred when both A and B are dependent events, as the ratio of the number of elements common in both A an

Non linear relationships, Non Linear Relationships If the correlation ...

Non Linear Relationships If the correlation coefficient and the scatter diagram do not indicate linear relationship, then the relationship may be nonlinear. Two such relations

Calenders, on which date of the week does 4th december 2001 falls?

on which date of the week does 4th december 2001 falls?

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

Show that cos - cos /sin - sin = a/b, A ladder sets against a wall at an ...

A ladder sets against a wall at an angle α to the horizontal.  If the foot is pulled away from the wall through a distance of 'a', so that is slides a distance 'b' down the wall ma

Power of x, (x+1/x)^2=3 then value of x^72+x^66+x^54+x^36+x^24+x^6+1 is

(x+1/x)^2=3 then value of x^72+x^66+x^54+x^36+x^24+x^6+1 is

Geometry, Ask question A triangle has two sides that measure 23 ft and 30 f...

Ask question A triangle has two sides that measure 23 ft and 30 ft. Which could be the measure of the third side? A. 5 ft B. 7 ft C. 10 ft D. 53 ft #Minimum 100 words accepted

Area and surface Are, I cant figure out how to study for my math test

I cant figure out how to study for my math test

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